Which of the following best measures improvements in the standard of living of a nation?

• A. Decrease in the unemployment rate alone
• B. Increase in total economic surplus
• C. Decrease in government spending
• D. Increase in the price level

Answer: (B)

Verified step by step guidance

1. Understand the concept of 'standard of living,' which generally refers to the overall economic well-being and quality of life of the population in a nation.
2. Recognize that the standard of living is best measured by factors that reflect the total benefits to society, including both consumer and producer welfare.
3. Recall that 'total economic surplus' is the sum of consumer surplus and producer surplus, representing the net benefits to society from economic activities.
4. Analyze why a decrease in unemployment rate alone, a decrease in government spending, or an increase in the price level do not fully capture improvements in overall welfare or standard of living.
5. Conclude that an increase in total economic surplus best measures improvements in the standard of living because it reflects a net gain in economic welfare for the nation.