For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.

-Changes in the relative prices of goods causes problems measuring real GDP because
A) consumers change their buying habits.
B) consumers buy less of the cheaper good.
C) firms produce more of the cheaper good.
D) price deflators only measure the price level.
E) they tend to be inaccurate.

Question

For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.
 
-Changes in the relative prices of goods causes problems measuring real GDP because
A) consumers change their buying habits. 
B) consumers buy less of the cheaper good. 
C) firms produce more of the cheaper good. 
D) price deflators only measure the price level. 
E) they tend to be inaccurate.

Quizplus · Accepted Answer

Changes in relative prices can lead consumers to substitute towards cheaper goods, altering the composition of goods and services in the economy, which complicates the measurement of real GDP.

For the Following Question(s), Suppose That an Economy Produces Only