Microeconomic Substitution Is Impossible for the Economy as a Whole

question 21

Multiple Choice

Microeconomic substitution is impossible for the economy as a whole because

• A)money is a veil.
• B)real GDP measures the total quantity of goods and services produced by all firms in all markets.
• C)the prices of some goods and services adjust sluggishly in response to changing economic conditions.
• D)a lower price level increases real wealth,which stimulates spending by consumers and vice-versa.

Explain the concept of value added by a firm and its significance in GDP calculation.

Differentiate between injections and leakages in the circular flow model and their impacts on GDP.

Interpret the effects of external trade activities and government transactions on GDP.

Analyze the relationship between GDP measurement and social welfare indicators.