19.3 Q&A – Flashcards
Unlock all answers in this set
Unlock answersquestion
Why does inflation make make nominal GDP a poor measure of the increase in total production from year to year?
How does real GDP deal with the problem inflation causes with nominal GDP?
answer
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities
All of the above
- keeping prices constant
- base year approach
- separates prices changes from quantity changes
question
How is the GDP deflator calculated?
answer
GDP deflator = (nominal GDP/ real GDP) X 100
question
Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP?
a. In years after the base year, nominal GDP..?
b. In the base year, nominal [X] real GDP
c. In years prior to the the base year, nominal GDP?
answer
a. greater than real GDP
b. equal to real GDP
c. less than real GDP
question
[Related to solved problem #3]
Suppose the information in the following table...
a. If the base is the year 2009m then real GDP for 2014 equals
b. and the real GDP for 2015 equals
c. The annual growth rate of real GDP is...?
answer
a. 2014: 8800
(55*120)+(2.50*110)+(35*55)=8,800
b. 2015: 9,537.50
(55*120)+(2.50*125)+(35*75)=9,537.50
c. 8.38 %
((9,537.50 -8,800)/8,800)*100=8.3807
((rGDP2015-rGDP2014)/rGDP2014) X 100
question
Indicate whether your agree or disagree with the following statement:
a. "If nominal GDP is less than real GDP, then the price must have fallen during the year"
b. Whenever real GDP declines, nominal GDP must also decline.
c. "If a recession is so severe that the price level declines, then we know that both real and nominal GDP must decline"
d. If real GDP stayed the same while nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined
answer
a. Agree, nominal GDP will be less than real GDP if the price level falls and is lower than the base year's prices
b. Disagree, Real GDP falls if output falls. Nominal GDP can increase if output falls, but prices rise
c. Agree. If both output and prices are falling, then both real and nominal GDP will fall.
d. Agree. If nominal GDP declined between 2008 and 2009, the the GDP deflator must also have declined.
(Because GDP deflator measures the price level)
question
a. Adjusting for inflation shows a more realistic view of Avatar's performance at the box office since...?
b. A more accurate measure of how well a movie has performed at the box office would be...?
c. Newspaper do not report the number of tickets sold...?
d. The comparison of the total number of tickets sold by all movies in 1939 with the total number of tickets sold by all movies in 2011...?
answer
a. it shows the increase in tickets in constant dollars
b. the inflation adjusted dollar value of tickets sold
c. since the dollar value of tickets sold is a better measure
d. will not be a good way to measure how the relative importance of movies in the economy has changed over time
question
The figure to the right shows movements in nominal GDP and real GDP...
a. in the years before the base year, the curve from .... would represent nominal GDP
b. in the years after the base year, the curve from ... would represent nominal GDP
answer
a. before: C to B
b. after B to E.
question
According to an article in the Economist, the Russian economy...
These two percentages are referring to changes in..?
answer
real GDP
question
[Real-Time Data Analysis]
Use the data in the following table to calculate the GDP deflator..
Which span of years saw the largest percentage increase in the price level, as measured by change in the GDP deflator?
answer
GDP deflator = (nominal GDP/ real GDP) X 100
2010 (14964/14784)*100= 101.22
2011 (15518/15021)*100= 103.31
2012 (16155/15355)*100= 105.21
2013 (16663/15583)*100= 106.93
2014 (17348/15962)*100= 108.68
2010 to 2011= 2%
2010 to 2011 ((103.31-101.22)/101.22)*100=2.0648
2011 to 2012 ((105.21-103.31)/103.31)*100=1.8391
2012 to 2013 ((106.93-105.21)/105.21)*100=1.6348
2013 to 2013 ((108.68-106.93)/106.93)*100=1.6366
question
Real GDP is..?
Over time, prices may change relative to each other. To take this change into account, the BEA calculates..?
answer
the value of goods and services evaluated at base year prices
real GDP using chain weights
question
In an economy with rising prices, compared to the base year,
answer
nominal GDP is larger in the years after the base year
question
If the GDP deflator in 2012 has a value of 98.0, then
answer
prices have decreased by 2 % between the base year and 2012
