Which of the following is a problem with using real GDP as a measure of economic well-being?
a. It fails to measure the value of leisure.
b. It fails to measure the underground economy.
c. It does not factor in externalities.
d. all of the above
Question 2
In most derivations of the aggregate expenditures model, investment is assumed to be independent of real GDP. What would be the effect on the aggregate expenditures (AE) function if investment spending were positively related to income?
a. The intercept of the AE function would rise.
b. The slope of the AE function would become flatter.
c. Both the slope and the intercept of the AE function would increase.
d. The slope of the AE function would become steeper.
e. The intercept of the AE function would increase, and its slope would become flatter.
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