A Problem of Interpreting Nominal GDP Is That

question 34

Multiple Choice

A problem of interpreting nominal GDP is that:

• A) an increase in nominal GDP can be caused by changes in either price or quantity.
• B) it does not measure changes in employment.
• C) it does not measure changes in price.
• D) it does not include net exports.
• E) it does not include the value obtained through purchases of stocks and bonds.

Recognize the effects of errors in inventory accounting on financial statements.

Understand the implications of inventory errors on financial statements.

Compute the estimated cost of ending inventory using the gross profit method.

Determine the estimated cost of ending inventory using the retail inventory method.

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Definitions:

Reinvestment Rate Risk

The risk that income from an investment will be reinvested at a lower rate than the original investment.

Time Horizon

The length of time an investor expects to hold an investment before taking money out.

Bond Portfolio Immunization

A strategy to minimize the impact of interest rate fluctuations on the market value of a bond portfolio by matching the portfolio's duration with the investor’s investment horizon.

Price Risk

The risk that the price of a financial asset will fluctuate, affecting the profit or loss of an investment.