Explain why GDP was never intended to be a measure of social well-being.

You are the mayor of your hometown, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage collection monopoly by awarding only one company a permit to collect garbage in your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial economies of scale to garbage collection. What are your options if you are interested in efficiency?
Explain why GDP was never intended to be a measure of social well-being.
Why is it important to distinguish nominal GDP from real GDP?
How is inflation typically measured? What are the different types of inflation? Why is it important to know which type of inflation we may be experiencing?
Discuss the three ranges of the aggregate supply (AS) curve. What could cause the AS curve to shift to the left? What impact would a leftward shift of the AS curve have on the economy?
Who loses from inflation? Who wins from inflation?
Suppose, in the base year, a typical market basket purchased by an urban family costs $250. In Year 1, the same market basket cost $950. What is the consumer price index (CPI) for Year 1? If the same market basket costs $1,000 in Year 2, what is the CPI for Year 2? What was the Year 2 rate of inflation?
Requirements: Complete the above questions. Be specific. For numerical problem-solving questions, please provide the careful numerical procedure about how you reach the final answer, i.e. show your work.

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