ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Unaffected in year 1; increases by $100 million in year 2.
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Increases by $40 million in year 1; increases by $60 million in year 2.
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Increases by $100 million in year 1; unaffected in year 2.
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Unaffected in year 1; unaffected in year 2.
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Increases by $60 million in year 1; increases by $40 million in year 2.
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Detailed explanation-1: -GDP stands for “Gross Domestic Product” and represents the total monetary value of all final goods and services produced (and sold on the market) within a country during a period of time (typically 1 year). GDP is the most commonly used measure of economic activity.
Detailed explanation-2: -GDP measures the monetary value of final goods and services-that is, those that are bought by the final user-produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country.
Detailed explanation-3: -However, it has some important limitations, including: The exclusion of non-market transactions. The failure to account for or represent the degree of income inequality in society. The failure to indicate whether the nation’s rate of growth is sustainable or not.
Detailed explanation-4: -depreciation the decrease in an asset’s value over time; for capital, it is the amount by which physical capital wears out over a given period of time. depreciation the decrease in an asset’s value over time; for capital, it is the amount by which physical capital wears out over a given period of time.