Table 19-9 -Refer to Table 19-9.Suppose That a Very Simple Economy Produces

question 18

Essay

Table 19-9

-Refer to Table 19-9.Suppose that a very simple economy produces three goods: pizzas,haircuts,and backpacks.Suppose the quantities produced and their corresponding prices for 2007 and 2011 are shown in the table above.Use the information to compute real GDP in the year 2007 and 2011.Assume that 2007 is the base year.Is output higher in 2011 or 2007? Why?

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Definitions:

Deferrals

Financial transactions that are recognized in a later accounting period than the period in which they occur, such as prepaid expenses.

Accruals

Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged, to reflect the true financial position of a company.

Cash Flow Assessment

The analysis of a company's cash inflows and outflows to evaluate its financial health.

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.