The Equation Representing the Final Demand Approach to Calculating GDP

question 101

Multiple Choice

The equation representing the final demand approach to calculating GDP is

• A)Y = C + I + X + IM.
• B)Y = C + I + G.
• C)Y = G + I + X − IM.
• D)Y = C+ I + G + (X − IM).

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Definitions:

Price Floor

A government or group-imposed price control that sets the minimum allowable price a seller can charge for a product or service.

Binding Price Ceilings

A legally imposed maximum price on goods or services that is below the equilibrium price, causing shortages and rationing.

Illegal Activity

Illegal activity encompasses actions that violate laws, including crimes such as theft, fraud, and assault, forbidden by societal legal frameworks.

Wasted Resources

A form of inefficiency in which people expend money, effort, and time to cope with the shortages caused by a price ceiling.