Explain why the rate of growth in GDP in current dollars can sometimes be a misleading statistic. GDP counts the product of steel but not the disproduct of air pollution. It counts the product of cigarettes but not the disproduct of a shorter li fe expectancy due to cancer. Until we can come up with a more reliable index, we cannot tell whether economic welfare is progressing or regressing. Classify each of the following statements as positive or normative.
Society faces a short-run tradeoff between inflation and unemployment.
A reduction in the rate of growth of money will reduce the rate of inflation. The Federal Reserve should reduce the rate of growth of money. Society ought to require welfare recipients to look for jobs. Lower tax rates encourage more work and more saving. From 1947 to 1997 the consumer price index in the US rose 637 percent.