Question 1

In the economy of Wrexington in 2008,real GDP was $25 billion and the GDP deflator was 68.What was Wrexington's nominal GDP in 2008?

Accepted Answer

The answer of In the economy of Wrexington in 2008,real...

Question 2

If nominal GDP is $8 trillion and real GDP is $10 trillion,then the GDP deflator is

Accepted Answer

The answer of If nominal GDP is $8 trillion and...

Question 3

Suppose an economy produces only cheese and fish.In 2008,20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each.In 2007,the base year,the price of cheese was $10 per unit and the price of fish was $75 per unit.For 2008,

Accepted Answer

Nominal GDP is the value of all goods and services produced in an economy in a given year, using current prices. In this case, nominal GDP is $500 (20 units of cheese x $5 each + 8 units of fish x $50 each).Real GDP is the value of all goods and services produced in an economy in a given year, using base year prices. In this case, real GDP is $800 (20 units of cheese x $10 each + 8 units of fish x $75 each).The GDP deflator is a measure of the overall price level in an economy. It is calculated by dividing nominal GDP by real GDP and multiplying by 100. In this case, the GDP deflator is 62.5 ($500 / $800 x 100).

Question 4

The term economists use to describe a situation in which the economy's overall price level is rising is

Accepted Answer

Inflation is the term used to describe a situation in which the economy's overall price level is rising. Growth and expansion refer to an increase in the economy's actual output, while recession refers to a decline in output.

Question 5

If nominal GDP doubles and the GDP deflator doubles,then real GDP

Accepted Answer

When nominal GDP doubles and the GDP deflator doubles, it means that the increase in the nominal GDP is solely due to an increase in prices. Real GDP is calculated by dividing nominal GDP by the GDP deflator, so if both double, they cancel each other out and real GDP remains constant.

Question 6

A country reported nominal GDP of $100 billion in 2008 and $75 billion in 2007.It also reported a GDP deflator of 125 in 2008 and 120 in 2007.Between 2007 and 2008,

Accepted Answer

The GDP deflator increased from 120 in 2007 to 125 in 2008, indicating that the price level rose. However, the nominal GDP increased from $75 billion in 2007 to $100 billion in 2008, suggesting that real output also increased. Therefore, both real output and the price level rose between 2007 and 2008.

Question 7

In the economy of Wrexington in 2008,nominal GDP was $28 trillion and real GDP was $32 trillion.What was Wrexington's GDP deflator in 2008?

Accepted Answer

The GDP deflator is calculated as (Nominal GDP / Real GDP) * 100. For Wrexington, it is ($28 trillion / $32 trillion) * 100 = 87.5.

Question 8

Suppose an economy produces only eggs and ham.In 2005,100 dozen eggs are sold at $3 per dozen and 50 pounds of ham are sold at $4 per pound.In 2004,the base year,eggs sold at $1.50 per dozen and ham sold at $5 per pound.For 2005,

Accepted Answer

Nominal GDP for 2005 can be calculated as:
(100 dozens eggs x $3/dozen) + (50 pounds of ham x $4/pound) = $300 + $200 = $500

Real GDP for 2005 can be calculated using the prices from the base year (2004):
(100 dozens eggs x $1.50/dozen) + (50 pounds of ham x $5/pound) = $150 + $250 = $400

The GDP deflator can be calculated as (Nominal GDP/ Real GDP) x 100:
($500/$400) x 100 = 125

Therefore, the correct answer is D.

Question 9

If real GDP doubles and the GDP deflator doubles,then nominal GDP

Accepted Answer

The answer of If real GDP doubles and the GDP...

Question 10

In the economy of Wrexington in 2008,nominal GDP was $10 trillion and real GDP was $4 trillion.What was Wrexington's GDP deflator in 2008?

Accepted Answer

The GDP deflator is calculated by dividing the nominal GDP by the real GDP and multiplying by 100.

GDP deflator = (Nominal GDP / Real GDP) x 100

Substituting the given values:

GDP deflator = (10 trillion / 4 trillion) x 100 
GDP deflator = 2.5 x 100 
GDP deflator = 250

Therefore, the GDP deflator for Wrexington in 2008 is 250. Option C is the correct answer.

Question 11

Suppose an economy produces only cranberries and maple syrup.In 2006,50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit.In 2005,the base year,the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit.For 2006,

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The answer of Suppose an economy produces only cranberries and...

Question 12

The inflation rate is the

Accepted Answer

The inflation rate is defined as the percentage change in the price level from one period to another.

Question 13

Suppose an economy's production consists only of corn and soybeans.In 2005,20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel.In 2004,the price of corn was $2 per bushel and the price of soybeans was $1 per bushel.Using 2004 as the base year,it follows that,for 2005,

Accepted Answer

Nominal GDP for 2005 = (20 x $4) + (10 x $2) = $80 + $20 = $100
Real GDP for 2005 using 2004 as the base year = (20 x $2) + (10 x $1) = $40 + $10 = $50
GDP deflator for 2005 = (Nominal GDP/Real GDP) x 100 = ($100/$50) x 100 = 200

Question 14

The GDP deflator for years subsequent to the base year measures the change in

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The answer of The GDP deflator for years subsequent to...

Question 15

In the economy of Wrexington in 2008,nominal GDP was $20 billion and the GDP deflator was 50.What was Wrexington's real GDP in 2008?

Accepted Answer

The answer of In the economy of Wrexington in 2008,nominal...

Question 16

The inflation rate in year 2 equals
A) .
B) .
C) .
D) .

Accepted Answer

The answer of The inflation rate in year 2 equals
A)...

Question 17

A country reported nominal GDP of $200 billion in 2008 and $180 billion in 2007.It also reported a GDP deflator of 125 in 2008 and 105 in 2007.Between 2007 and 2008,

Accepted Answer

The nominal GDP increased, but the GDP deflator, which measures price level changes, also increased significantly. This suggests that the increase in nominal GDP was due to higher prices rather than an increase in real output, indicating that real output fell while the price level rose.

Question 18

If nominal GDP is $10 trillion and real GDP is $8 trillion,then the GDP deflator is

Accepted Answer

The GDP deflator is a measure of the overall price level of goods and services produced in an economy. It is calculated by dividing nominal GDP by real GDP and multiplying by 100.

GDP deflator = (Nominal GDP / Real GDP) x 100

In this case, nominal GDP is $10 trillion and real GDP is $8 trillion.

GDP deflator = (10,000 / 8,000) x 100 = 125

Therefore, the answer is (C) and this indicates that the price level has increased by 25 percent since the base year.

Question 19

In the economy of Wrexington in 2008,real GDP was $5 trillion and the GDP deflator was 200.What was Wrexington's nominal GDP in 2008?

Accepted Answer

Nominal GDP = Real GDP x GDP deflator
Nominal GDP = $5 trillion x 200
Nominal GDP = $1,000 trillion or $10 trillion (in trillions)

Question 20

In the economy of Wrexington in 2008,nominal GDP was $18 billion and the GDP deflator was 120.What was Wrexington's real GDP in 2008?

Accepted Answer

Real GDP = (Nominal GDP / GDP Deflator) 
Real GDP = (18 billion / 120) 
Real GDP = $15 billion

Quiz 23: Measuring a Nations Income