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:

Net Assets

Net assets represent the total assets of a company minus its total liabilities, indicating the actual value of a company’s equity held by shareholders.

Acquisition

The process by which one company takes over another company either by purchasing its assets or its stock.

Goodwill

An intangible asset representing the excess of acquisition cost over the fair value of identifiable net assets acquired in a business combination.

Acquiring Company

A company that purchases most or all of another company's shares to gain control of that company.