Question

​The rate of real economic growth

a. ​is underestimated using measures of income growth.
b. ​​is overestimated using measures of income growth.
c. ​​is underestimated using measures of technological growth.
d.dis overestimated using measures of technological growth.

Answer 1

Economic growth is assessed by growth accounting studies and is often underestimated because technological contributions can be difficult to quantify, leading to a potential understatement of true growth rates.

Step-by-step explanation:

When analyzing the rate of real economic growth, economists use growth accounting studies to determine the contribution of physical capital, human capital, and technology. Economic growth is measured by the percentage change in real (inflation-adjusted) gross domestic product (GDP), and a good growth rate is generally considered to be more than 3%.

However, when researchers use measures of income growth to underpin economic growth, they may not fully capture the effects of technological improvements. In these scenarios, it is often stated that growth is underestimated due to the 'residual' – the unexplained part of growth once physical and human capital have been accounted for, which is then attributed to technological growth.

Answer 2

B) is overestimated using measures of income growth

Step-by-step explanation:

Real economic growth is overestimated, because measures of income growth such as Gross Domestic Product and Gross National Income do not take into account inflation. To calculate Real GDP and Real GDP growth, inflation must be taken into account, usually the inflation index is the GDP Deflator.

The GDP Deflator measures the price changes of all final goods and services produced in an economy, in a given year.

Real GDP = Nominal GDP / GDP Deflator.