When We Try to Measure Real GDP and the Price

question 25

Multiple Choice

When we try to measure real GDP and the price level,if we underestimate the growth in real GDP,we will

• A) always underestimate the rate of inflation.
• B) sometimes underestimate the rate of inflation.
• C) always overestimate the rate of inflation.
• D) sometimes overestimate the rate of inflation.
• E) not be able to measure the rate of inflation.

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Definitions:

IRR

The Internal Rate of Return is a financial measurement tool used to assess the profitability of prospective investments.

Accounting Basis

The method used to record financial transactions; common methods include cash basis and accrual basis accounting.

Scenario Analysis

A method of evaluating potential future scenarios by contemplating various possible results, often used for strategic planning purposes.

Simulation Analysis

A statistical method that involves running multiple scenarios of a model in order to estimate the probability of different outcomes.