Using Dollar Values to Calculate GDP Is Advantageous Because

question 21

Multiple Choice

Using dollar values to calculate GDP is advantageous because

• A) people can most easily understand dollar amounts
• B) it employs a common unit of measurement for very different things
• C) less valuable goods count the same as more valuable goods
• D) other methods of calculating production are not as intuitively clear
• E) money is a universal yardstick for measurement

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Definitions:

Market Capitalization Rate

The expected return on an investment in the market, often used in the valuation of stocks and to determine a company's cost of equity.

PVGO

Present Value of Growth Opportunities; a model that estimates the value of a firm's shares excluding its current earnings, focusing on future growth.

P/E Ratio

Price-to-earnings ratio, a valuation metric for determining the relative worth of a company's shares by dividing stock price by earnings per share.

Cost of Equity

The return that investors require for investing in a company's equity, reflecting the risk of the investment.