TAKE TEST: UNIT II INSTRUCTIONS

Take Test: Unit II Instructions

Is the State of the USA designed to replace GDP as the primary measure of economic performance?

Gertner (2010) argues that the motif should not be to replace GDP as the primary measure of economic performance. What is required is to extend the debate to include many other sources of information (Gertner, 2010). This is inherently possible and would require historical data adjustments to fulfill the purpose. Thus a strict nonpartisan mindset, along with transparency in the process would go a long way in manipulating the GDP to become a highly responsive indicator of standard of living in the economy.

What is the Hedonistic Method and why is it sometimes used to track changes in the consumer price index?

The hedonistic method is used by economists and TV analysts (sometimes) to conduct “analysis of the impact of any quality changes to products in the CPI market basket” (Kokoski et.al, 2000). This is done by breaking down the contents and characteristics of each good/item product or service. The breakdown is achieved to determine the exact dollar value of each particular characteristic. Thus the process is efficient in capturing relative changes in product quality with respect to price changes. Thus, the hedonistic model is a suitable method to evaluate if consumers are paying extra price for added quality features in a product or general inflationary pressures in an economy (Kokoski et.al, 2000). Discuss what is, and what is not, included in calculating GDP

GDP measures the total worth of goods and services produced in an economy, and therefore, it is recognized with its market value. However, GDP does not contain the measurement of the factors such as health, education and other indicators that assess the standard of living in a country. GDP is an official measure of the ...