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ProblemSet1 Solutions - Name Section T.A Name 180.101...

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Name: Section: T.A. Name 180.101 ELEMENTS OF MACROECONOMICS Fall, 2007 Problem Set #1 Prof. Louis J. Maccini Solutions INSTRUCTIONS: Above, write your name, section number and T. A. name. Answer each question in the space provided, or on the back of the same sheet. 1. “Nominal GDP includes the current value of services produced in the economy.” True, False, Uncertain. Explain. True: Nominal GDP is intended to measure the final output of all goods and services. In fact, services are now a larger fraction of the US economy than manufactured goods or goods as a whole. 2. Compare and contrast the Consumer Price Index with the Implicit Price Deflator for GDP as a measure of the over-all price level for the economy. CPI has limitations as a measure of the price level for the whole economy: a) Ignores non-urban consumers and the prices of goods consumed by them. b) Ignores the prices of investment goods, especially plant and equipment prices.
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