MacroeconomicsChapter 2 - 4. a. 2006 GDP:

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ANSWERS TO END-OF-CHAPTER PROBLEMS CHAPTER 2 Quick Check 1. a. True. b. True/Uncertain. Real GDP increased by a factor of 25; nominal GDP increased by a factor of 21. Real GDP per person increased by a factor of 4. c. False. d. True. e. False. The level of the CPI means nothing. The rate of change of the CPI is one measure of inflation. f. Uncertain. Which index is better depends on what we are trying to measure—inflation faced by consumers or by the economy as a whole. g. False. The underground economy is large, but by far the majority of the measured unemployed in Spain are not employed in the underground economy.
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Unformatted text preview: 4. a. 2006 GDP: 10($2,000)+4($1,000)+1000($1)=$25,000 2007 GDP: 12($3,000)+6($500)+1000($1)=$40,000 Nominal GDP has increased by 60%. b. 2006 real (2006) GDP: $25,000 2007 real (2006) GDP: 12($2,000)+6($1,000)+1000($1)=$31,000 Real (2006) GDP has increased by 24%. c. 2006 real (2007) GDP: 10($3,000)+4($500)+1,000($1)=$33,000 2007 real (2007) GDP: $40,000. Real (2007) GDP has increased by 21.2%. d. The answers measure real GDP growth in different units. Neither answer is incorrect, just as measurement in inches is not more or less correct than measurement in centimeters. 133...
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