In Computing GDP, Market Prices Are Used to Value Final

question 9

Multiple Choice

In computing GDP, market prices are used to value final goods and services because

• A) market prices reflect the values of goods and services to the buyer.
• B) market prices do not change much over time, so it is easy to make comparisons between years.
• C) if market prices are out of line with how people value goods, the government sets price ceilings and price floors.
• D) None of the above is correct; market prices are not used in computing GDP.

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Definitions:

Insurance Policy

An insurance policy is a contract between an insurer and an insured, outlining the terms under which the insurer agrees to compensate the insured for specific losses.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Unrelated Year-end Adjustments

Adjustments made to the financial statements at year-end that do not pertain to the normal operations of the business.

Prepaid Insurance

An asset account representing payments made for insurance coverage before the coverage period.