Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Part C please.

Transcribed Image Text:**Part A:** Why must double counting be avoided when measuring GDP? Provide an elaborate answer with at least one example.
**Part B:** **Aggregate Demand (AD) Curve** shows the relationship between the economy's price level and real GDP demanded. In other words, real GDP demanded by different groups of buyers, i.e., Consumers (C), Businesses (I), Government (G), and Net Amount by Foreigners (Export - Import), at different price levels give us points on a graph, which are connected to form a curve called AD curve. Review the textbook chapter, and conduct internet research to discuss determinants of AD or factors that shift the AD curve.
**Part C:** The following graph shows business cycle fluctuation in a hypothetical economy. "Y" denotes year, and "Q" denotes quarter. What do points A, B, C, and D denote? Write at least a sentence each about what these points denote. Also, explain what represent the curve segments: A to B, B to C, and C to D. Lastly, because economic activity fluctuates, how is long-term growth possible?
**Graph Explanation:**
- **Graph Title:** Real GDP (billion $)
- **Axes:** The x-axis represents different quarters over three years (Y1 Q1 to Y3 Q2), while the y-axis measures Real GDP in billions of dollars, ranging from 0 to 50.
- **Points:**
- **A**: Represents a lower point of economic activity at approximately 25 billion dollars in Y1 Q1.
- **B**: Shows an increase to about 35 billion dollars in Y1 Q3.
- **C**: Indicates a decrease to around 25 billion dollars in Y2 Q3.
- **D**: Demonstrates growth to approximately 45 billion dollars in Y3 Q2.
- **Curve Segments:**
- **A to B**: Represents economic recovery or expansion.
- **B to C**: Indicates a contraction or recession.
- **C to D**: Shows recovery and further economic growth.
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