Why Is GDP Computed Using Market Prices as the Value

question 32

Multiple Choice

Why is GDP computed using market prices as the value of final goods and services?

• A) because market prices do not change much, so it is easy to make comparisons between years
• B) because if market prices are out of line with how people value goods, the government sets ceilings and floors on them
• C) because costs change too much to reflect the value of goods and services
• D) because market prices reflect the value of goods and services

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Definitions:

Free Trade

An economic policy that allows imports and exports between countries without regulatory barriers or tariffs.

South Asia

A region in Asia, comprising countries such as India, Pakistan, Bangladesh, and others, known for its diverse cultures and economies.

Arbitrage

The simultaneous purchase and sale of the same assets in different markets to profit from unequal prices.

Geographic Boundaries

Demarcated physical limits of geographical areas, which can include country borders, state lines, or natural barriers.