What Is the Greatest Weakness of Using Dependency Rates to Project

question 61

Multiple Choice

What is the greatest weakness of using dependency rates to project into the future?

• A) It requires assumptions that do not remain valid over time.
• B) It cannot anticipate the effects of social change on policy.
• C) It neglects the benefits of an older population.
• D) It tends to yield false negatives (Type II errors).

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Definitions:

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy, used to convert nominal GDP into real GDP.

Deflation

A decrease in the general price level of goods and services, often indicating reduced consumer demand or excess supply.

Inflation

A general increase in prices and fall in the purchasing value of money over time.

Real GDP

Real Gross Domestic Product, indicating the total value of all produced goods and services in an economy for a year, adjusted to account for inflation, thereby showing true economic value.