Purchasing Power Parity Prices Are Used to Construct GDP Data

question 294

Multiple Choice

Purchasing power parity prices are used to construct GDP data that

• A) do not omit the underground economy.
• B) can be used to make more valid comparisons between one country and another.
• C) is a proper measure of economic welfare.
• D) adjust for differences in population.

---

Definitions:

Annual Output

The total value of goods and services produced by an economy or a firm in one year.

Rational Expectations

The economic theory suggesting individuals make decisions based on their logical expectations for the future, effectively using all available information to predict future events accurately.

Long-Run Phillips Curve

A concept suggesting that in the long term, there is no trade-off between inflation and unemployment, implying that inflation does not affect the natural rate of unemployment.

Short-Run Phillips Curve

The Short-Run Phillips Curve depicts an inverse relationship between unemployment and inflation in the short term, indicating that lower unemployment can come with higher inflation.