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Suppose a new drug can cure cancer. It costs a few cents to make the pill, and one pill can stop a malignant growth with zero side effects. The drug goes on sale for a few cents a pill, and although the manufacturer makes millions, the money value of the produc- tion is tiny. Is it right that GDP has not really changed much? What would the price index, both before and after the invention and sale of the drug, look like?

Microeconomics, Economics

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