Assume an Economy That Is Producing Only One Product

question 23

Multiple Choice

$$\begin{array} { | c | c | c | } \hline \text { Year } & \text { Units of Output } & \text { Price Per Unit } \\\hline 1 & 20 & \$ 4 \\\hline 2 & 25 & 4 \\\hline 3 & 30 & 6 \\\hline\end{array}$$ Assume an economy that is producing only one product. Output and price data for a three-year period are shown in the table. If year 2 is chosen as the base year, in years 1 and 3 the price index
Values are

• A) 4 and 6, respectively.
• B) 6 and 4, respectively.
• C) 120 and 100, respectively.
• D) 100 and 150, respectively.

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Definitions:

Gross Investment

The total amount spent on purchases of new capital and on replacing depreciated capital within a given period.

Capital Stock

Capital stock is the total amount of physical, non-consumable goods, or financial assets that a company uses for production of goods or services, including buildings, machinery, and equipment.

Investment Project

A specific plan or initiative undertaken by a business or organization involving capital investment aimed at achieving certain financial or strategic goals.

Interest

The cost paid by a borrower for the use of borrowed money, or the income earned by an investor on their investment.