Quiz_197 - 100 A B C D

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Unformatted text preview: 100) The GDP deflator is a measure of the A) total production of the economy unadjusted for inflation. B) average level of prices of final goods and services in the economy. C) average level of prices of intermediate goods and services in the economy. D) total production of the economy adjusted for inflation. 100) Answer: B Diff: 1 Page Ref: 630/224 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 101) If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be A) less than 0. B) less than 100. C) equal to 100. D) greater than 100. 101) Answer: D Diff: 2 Page Ref: 630-631/224-225 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 102) The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is A) 105% higher in year 2 than in year 1. B) 5% higher in year 1 than in year 2. D) 5% higher in year 2 than in year 1. C) 105% higher in year 1 than in year 2. 102) Answer: D Diff: 2 Page Ref: 630-631/224-225 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills 103) If the GDP deflator is less than 100, then for that year nominal GDP ________ real GDP. A) is greater than B) is less than C) may be greater than or less than D) equals Answer: B Diff: 2 Page Ref: 630-631/224-225 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 25 103) Table 19-11 Year 2010 2011 Nominal GDP 14,078 14,441 Real GDP 13,254 13,312 104) Refer to Table 19-11. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2011 equals A) 92.2. B) 102.6. C) 108.5. D) 109.1. 104) Answer: C Diff: 2 Page Ref: 630-631/224-225 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills Table 19-12 Year 2009 2010 2011 Nominal GDP $13,399 14,078 14,441 Real GDP $12,976 13,254 13,312 105) Refer to Table 19-12. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2010 equals A) 94.1. B) 105.1. C) 106.2. D) 108.5. 105) Answer: B Diff: 2 Page Ref: 630-631/224-225 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills TRUE/FALSE. Write ʹTʹ if the statement is true and ʹFʹ if the statement is false. 106) If prices rise on average in the U.S. economy, the purchasing power of a dollar declines. Answer: True 106) False Diff: 1 Page Ref: 629/223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 107) Using ʺchain-weightedʺ prices to calculate real GDP remedies the distortions causes by changes in relative prices over time. Answer: True False Diff: 1 Page Ref: 629/223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 26 107) 108) If the GDP deflator is equal to 100, then for that year nominal GDP is equal to real GDP Answer: True 108) False Diff: 1 Page Ref: 630/224 Topic: The GDP Deflator Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 109) In the term ʺreal GDP,ʺ what does ʺGDPʺ stand for and what does it measure? What does ʺrealʺ indicate? 109) Answer: GDP stands for gross domestic product and measures the value of the total production of final goods and services. ʺRealʺ indicates that the goods and services produced are valued using the prices of the base year, not the current year, and therefore are adjusted for inflation. Diff: 2 Page Ref: 628/222 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 110) 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? 110) Answer: Both nominal GDP and real GDP are measured in terms of dollars. Nominal GDP is measured using the value of the dollar for that specific year, and real GDP is measured using the value of the dollar for the base year. Diff: 2 Page Ref: 628-629/222-223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 111) 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. Answer: Real GDP would be higher, as long as the base year was before the period of deflation. Nominal GDP would be measured using the lower prices that resulted from the deflation. Real GDP would use the higher prices before the deflation, assuming the base year was before the deflation. Diff: 3 Page Ref: 629/223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Reflective Thinking 27 111) 112) 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? 112) Answer: Disagree. It depends on whether the year being examined is before or after the base year. If after the base year, then nominal GDP will always exceed real GDP if inflation has occurred. If before the base year, then nominal GDP will always be less than real GDP if inflation has occurred. If the year being examined is before the base year and inflation has occurred, then the base year prices will exceed the prices of that year. Diff: 3 Page Ref: 629/223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills Table 19-13 2009 2011 Product Quantity Price Quantity Hats 200 $20 250 French fries 2,000 1 2,300 Digital cameras 40 200 50 Price $21 2 140 113) Refer to Table 19-13. Consider the following data for a simple economy: Calculate nominal GDP and real GDP for 2011, using 2009 as the base year. Show your work. 113) Answer: Nominal GDP for 2011 equals (250 × $21) + (2,300 × $2) + (50 × $140) = $16,850. Real GDP for 2011 equals (250 × $20) + (2,300 × $1) + (50 × $200) = $17,300. Diff: 3 Page Ref: 628-629/222-223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills Table 19-14 2005 2010 2011 Quantity Quantity Quantity Product Price Price Price MP3s 40 $250.00 45 $200.00 50 $150.00 Tacos 2,000 2.00 2,200 2.25 2,300 2.40 Coats 300 50.00 310 52.00 350 55.00 114) Refer to Table 19-14. Consider the data above for a simple economy: Using 2005 as the base year, calculate nominal GDP, real GDP, and the GDP deflator for 2011. Show your work. Answer: Nominal GDP for 2011 equals (50 × $150) + (2,300 × $2.40) + (350 × $55) = $32,270. Real GDP for 2011 equals (50 × $250) + (2,300 × $2.00) + (350 × $50) =$34,600. $32,270 × 100 = 93.3 The GDP deflator equals $34,600 Diff: 3 Page Ref: 628-629/222-223 Topic: Real GDP versus Nominal GDP Learning Outcome: Macro 3: Identify and interpret key macroeconomic measures AACSB: Analytic Skills 28 114) ...
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