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Practice Exam Exercises for Chapter 2 key

Practice Exam Exercises for Chapter 2 key - our case is...

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BEcon 301, 2009 Practice Exam Exercises for Chapter 2 – Answer key 1. CPI 2. lose ; lose 3. CPI; increase 4. False 5. False 6. a) Nominal GDP 2004 = 11,818.02; Nominal GDP 2006 = 13,300.29 b) GDP deflator gives the average price level for all domestically produced goods and services. Inflation rate in GDP deflator = .0614 or 6.14% c) Growth rate in real GDP = 0.0603 or 6.03% ; Growth rate in nominal GDP= .125 or 12.5%. Nominal GDP increases over time for two reasons: 1) production increases and/or 2) prices increase. If prices stay constant then the growth rate in real GDP would be equal to the growth rate of nominal GDP. 7. a) Real GDP = 11,615.2 b) Nominal GDP = 14,161.5 c) Quarterly inflation 2008/1 st Q = 0.0066 or 0.66% d) GDP deflator = 121.9 e) Real GDP = 11,726.4 f) The GDP deflator is the price index used to measure the average price level of domestically produced goods and service. If the index has a value of 120.8 it means that average price level increased by 20.8% since the base year, which is
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Unformatted text preview: our case is 2000. g) Nominal GDP measures the final value of domestically produced goods and services using current prices. The real GDP measures the final value domestically produced goods and services at constant prices (i.e using prices from a given base year). The reason why nominal GDP is higher than real GDP is because prices have increased since the base year of 2000. h) Quarterly growth rate in real GDP expressed at annual rate tells us what the annual change would be if the quarter's pace of growth/contraction continued for a year. It is calculated as quarterly growth rate multiplied by four (because there are four quarters in a year). The average growth rate of GDP over the past thirty years or so was 3.1%. (See textbook Chapter 1, page 4). 2008/1 st Q growth rate at annual rate = 1.06%; BELOW 2008/2 nd Q growth rate at annual rate = 2.76%; BELOW 8. 0.0909 or 9.09%. See textbook page 26....
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