If National Income Accountants Fail to Make an Adequate Adjustment

question 43

Multiple Choice

If national income accountants fail to make an adequate adjustment for increases in the quality of goods and services over time,

• A) increases in real GDP will understate the growth rate of real output.
• B) increases in real GDP will overstate the growth rate of real output.
• C) the GDP deflator will overstate the rate of inflation.
• D) the GDP deflator will understate the rate of inflation.
• E) both a and c are correct.

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Definitions:

Irrigation Water

Water that is supplied to crops to assist in their growth, often through artificial means such as sprinklers or drip lines.

Wasted

Resources or materials that are disposed of or used inefficiently or ineffectively.

Canadian Households

Residential units in Canada where individuals or groups of people live, representing the domestic aspect of culture and economy.

Flushing Toilets

Sanitation fixtures used for the disposal of human urine and feces by using water to flush them through a drainpipe to another location.