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macro_tif1_ch07

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Unformatted text preview: e difference between real GDP and nominal AACSB Coding: GDP Analytic Skills Special Feature: None 24. Table 712 1998 1999 \$8,790 \$9,299 \$8,516 \$8,876 Refer to Table 7-12. Consider the data above on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 1998 equals A) 103.2. B) 104.2. C) 96.9. D) 105.7. Answer: A Diff: 2 Type: MC Page Ref: To pic : 648/228 G S Analytical Objective: LO3: Discuss the difference between real GDP and nominal AACSB Coding: GDP Analytic Skills Special Feature: None 25. If prices rise on average in the U.S. economy, the purchasing power of a dollar declines. Answer: True F Dif f: 1 Type: TF Page Ref: To pic : 647/227 R S Conceptual Objective: LO3: Discuss the difference between real GDP and nominal AACSB Coding: GDP Reflective Thinking Special Feature: None 26. Using "chain- weighted" prices to calculate real GDP remedies the distortions causes by changed in relative prices over time. Answer: True F Dif f: 1 Type: TF Page Ref: To pic : 647/227 R S Conceptual Objective: LO3: Discuss the difference between real GDP and nominal AACSB Coding: GDP Reflective Thinking Special Feature: None 27. In the term "real GDP," what does "GDP" stand for and what does it measure? What does "real" indicate? Answer: GDP stands for gross domestic product and measures the value of the total production of final goods and services. "Real" indicates that the goods and services produced are valued using the prices of the base Diff: 2 year, not the current year, and therefor e are adjusted for inflation . Type: SA Page Ref: To pic : 646-7/226-7 R S Conceptual Objective: LO3: Discuss the difference between real GDP and nominal AACSB Coding: GDP Reflective Thinking Special Feature: None 28. Is measured in terms of quantity or in terms of dollars? If dollars, the value of the dollar from what period? nominal Is real GDP measured in terms of quantity or in terms of dollars? If dollars, the value of the dollar from GDP what period? 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 Diff: 2 measure d using the value of the dollar for the base year. Type: SA Page Ref: To pic : 646-7/226-7 R S Conceptual Objective: LO3: Discuss the difference between real GDP and nominal AACSB Coding: GDP Reflective Thinking Special Feature: None 29. Japan of deflation a declining price level during the 1990s. During a deflationary period, which would be experienc higher: nominal GDP or real GDP? Why? Assume that the base year of choice is prior to the ed periods 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 Diff: 3 deflation , assumin g the base year was before the deflation . Type: SA Page Ref: To pic : 646-7/226-7 R S Conceptu...
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