Question 1

Using "chain-weighted" prices to calculate real GDP remedies the distortions causes by changes in relative prices over time.

Accepted Answer

Chain-weighted prices are calculated by using recent prices as weights instead of fixed-base period prices. This approach takes into account changes in the relative prices of goods and services over time, thus avoiding the distortion of real GDP caused by changes in the composition of output.

Question 2

Table 8-20
2016 2018
 
-Refer to Table 8-20.Consider the following data for a simple economy: Calculate nominal GDP and real GDP for 2018,using 2016 as the base year.Show your work.

Accepted Answer

The answer of Table 8-20
2016 2018
 
-Refer to Table 8-20.Consider...

Question 3

If nominal GDP is less than real GDP,then the GDP deflator will be greater than 100.

Accepted Answer

If nominal GDP is less than real GDP, it would signify that the overall price levels have decreased, which means the GDP deflator (which measures the inflation rate) would be less than 100.

Question 4

Is nominal GDP measured in terms of quantity or in terms of dollars? If dollars,the value of the dollar from what period? Is real GDP measured in terms of quantity or in terms of dollars? If dollars,the value of the dollar from what period?

Accepted Answer

The answer of Is nominal GDP measured in terms of...

Question 5

Nominal GDP measures the value of all final goods and services at base-year prices.

Accepted Answer

Nominal GDP measures the value of all final goods and services at current market prices, not base-year prices. Real GDP, on the other hand, adjusts for inflation by measuring output at constant base-year prices.

Question 6

Table 8-23
 
-Refer to Table 8-23.Suppose that a very simple economy produces three goods: pizzas,haircuts,and backpacks.Suppose that the quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.Use the information to compute the real GDP in the year 2013 and 2018.Calculate the real GDP in 2018 assuming the base year is 2013.Do the same calculation assuming the base year is 2018.Are the calculations different? Why?

Accepted Answer

The answer of Table 8-23
 
-Refer to Table 8-23.Suppose that...

Question 7

Table 8-22
2013 2018
 
-Refer to Table 8-22.Suppose that a very simple economy produces three goods: pizzas,haircuts,and backpacks.Suppose the quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.Use the information to compute real GDP in the year 2013 and 2018.Assume that 2013 is the base year.Is output higher in 2018 or 2013? Why?

Accepted Answer

The answer of Table 8-22
2013 2018
 
-Refer to Table 8-22.Suppose...

Question 8

If the GDP deflator is less than 100,which will be higher: nominal GDP or real GDP? Why?

Accepted Answer

The answer of If the GDP deflator is less than...

Question 9

The output of Mexican citizens who work in Texas would be included in the

Accepted Answer

The gross national product (GNP) of a country includes the output of its citizens, regardless of where they are working in the world. Therefore, the output of Mexican citizens who work in Texas would be included in the gross national product of Mexico.

Question 10

Since real GDP is adjusted for inflation and nominal GDP is not,nominal GDP must always be higher than real GDP.Do you agree or disagree? Why?

Accepted Answer

The answer of Since real GDP is adjusted for inflation...

Question 11

Table 8-25
 
-Refer to Table 8-25.Given the information above,calculate the GDP deflator for both 2017 and 2018.What does the value of the deflator in the year 2017 tell you about that year with respect to the base year? What happened to prices in 2018 as compared to 2017?

Accepted Answer

The answer of Table 8-25
 
-Refer to Table 8-25.Given the...

Question 12

Gross national product (GNP)of the United States is the market value of all final goods and services

Accepted Answer

Gross National Product (GNP) measures the market value of all final goods and services produced by the residents of a country, regardless of where the production takes place. Hence, it includes the activities of citizens and businesses from that country operating abroad.

Question 13

In the term "real GDP," what does "GDP" stand for and what does it measure? What does "real" indicate?

Accepted Answer

The answer of In the term "real GDP," what does...

Question 14

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?

Accepted Answer

The answer of Why does inflation make nominal GDP a...

Question 15

Use the formula for the GDP deflator to explain how it is affected by an increase in prices in the economy.If the value of the deflator equals 100,what does that tell you about that year with respect to the base year?

Accepted Answer

The answer of Use the formula for the GDP deflator...

Question 16

Table 8-21
2013 2017 2018
 
-Refer to Table 8-21.Consider the data above for a simple economy: Using 2013 as the base year,calculate nominal GDP,real GDP,and the GDP deflator for 2018.Show your work.

Accepted Answer

The answer of Table 8-21
2013 2017 2018
 
-Refer to Table...

Question 17

If the GDP deflator is equal to 100,then for that year nominal GDP is equal to real GDP.

Accepted Answer

If the GDP deflator is equal to 100, it means that the price level in the current year is the same as the base year. Therefore, nominal GDP (which includes current prices) and real GDP (which is adjusted for inflation) will be the same.

Question 18

Table 8-24
 
-Refer to Table 8-24.Given the following information,calculate the rate of increase in the price level from 2017 to 2018.Use the percent change in the GDP deflator.

Accepted Answer

The answer of Table 8-24
 
-Refer to Table 8-24.Given the...

Question 19

Japan experienced periods of deflation-a declining price level-during the 1990s.During a deflationary period,which would be higher: nominal GDP or real GDP? Why? Assume that the base year of choice is prior to the deflationary period.

Accepted Answer

The answer of Japan experienced periods of deflation-a declining price...

Question 20

The GDP deflator is a measure of the price level which is calculated as nominal GDP divided by real GDP and multiplied by 100.

Accepted Answer

This is the correct formula for calculating the GDP deflator. Nominal GDP measures the current market value of all final goods and services produced in a country, while real GDP adjusts for inflation by using constant prices from a specific base year. Dividing nominal GDP by real GDP gives a ratio that can be multiplied by 100 to convert it to a percentage, representing the overall price level of the economy.

Quiz 8: GDP: Measuring Total Production and Income