Note that some of the statements could be viewed as either true or false depending on your assumptions about the economy. Therefore, your grade is based solely on your explanations. Each question should take you no longer than 10 minutes to answer. All questions have equal weight. GDP is calculated by summing up personal income on individual federal income tax returns.
Price indices do a good job accounting for changes in the quality of goods.
A business cycle is defined as a series of movements in GDP that take exactly two years to complete. Education is bad for economic prosperity since it keeps people out of the workforce. In the neoclassical growth model an increase in the savings rate causes economic growth Since increased savings induces more economic growth, it is always optimal to increase savings. Government deficits stimulate private investment. An increase in the government's deficit puts downward pressure on the real interest rate.