In some countries, price controls exist on some goods, which set maximum prices at which these goods can be sold. Indeed, the United States experienced a period of wage and price controls when the Nixon administration introduced wage and price controls in 1971. Sometimes the existence of price controls leads to the growth of black markets, where goods are exchanged at prices above the legal maximums. Carefully explain how price controls present a problem for measuring GDP and for measuring the price level and inflation.
Answer to relevant QuestionsIn this chapter, we learned that the quantity of U.S. currency outstanding was $3,490 in March 2012. Suppose that we were to try to use this number to estimate the amount of output produced in the underground economy in the ...Suppose that the government deficit is 10, interest on the government debt is 5, taxes are 40, government expenditures are 30, consumption expenditures are 80, net factor payments are 10, the current account surplus is – ...Using a diagram show that if the consumer prefers more to less, then indifference curves cannot cross.Recall that leisure time in our model of the representative consumer is intended to capture any time spent not working in the market, including production at home such as yard work and caring for children. Suppose that the ...Many negative externalities exist in cities. For example, a high concentration of automobile traffic in cities generates pollution and causes congestion, and both pollution and congestion are negative externalities. When a ...
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