Chapter 9 Testing Quiz

$5,000

Find per capita GDP when GDP is 3,000,000,000 and the population is 600,000. -Cannot be determined -$5,000 -$500 -$50,000

15 trillion (If prices go down, then the deflator will be less than 1. So for this question, a reduction of 20% in the price level translates to 80 as the deflator. You would then divide the nominal GDP of 2003 by 80 and then multiple by 100. Or you can just divide the nominal GDP of 2003 by .80 to arrive at 15 trillion.)

GDP has gone up from 10 trillion in 2001 (base year) to 12 trillion dollars in 2003. But prices have gone down by 20% in that period. What is the real GDP in 2003? -9.6 trillion -15 trillion -12 trillion -666.6 trillion

$17 trillion, 13.33% (If the price level stays the same, then any change in GDP is only a change in actual production. There is no increase in prices (inflation) or decrease in prices (deflation). So the real GDP for 2015 would be 17 trillion. Nominal GDP and real GDP would be the same.)

GDP rises from $15 trillion in 2012 to $17 trillion in 2015, but the price level remains the same. How much is real GDP in 2015? By what percentage did real GDP rise between 2012 and 2015? -Between $15 and $17 trillion, 13.33% -$17 trillion, 13.33% -$17 trillion, 11.7% -Cannot be determined -Between $15 and $17 trillion, 11.7%

Approximately 4.28 trillion (If prices have increased by 40%, then the deflator would be 140. Remember that the base year always is 100. Then any value over 100 means that prices have increased. Any value below 100 means that prices have decreased.)

GDP rises from $5 trillion in 1990, the base year, to 6 trillion in 1994. Prices have increased by 40%. Find real GDP in 1994. -Approximately 4.28 trillion -Approximately 6.5 trillion -Approximately 4 trillion -Cannot be determined

10.5 trillion (The deflator would be 95 which is 5% below 100 which always represents the base year. If Nominal GDP goes up and prices go down, then output must have gone up represented by Real GDP.)

GDP rises from $8 trillion in 2005 to $10 trillion in 2006, but the price level goes down 5%. How much is real GDP approximately in 2006? -2.1 trillion -10.5 trillion -11 trillion -9.5 trillion

15%

Given: C = 60 percent of GDP; I = 5 percent of GDP; G = 20 percent of GDP. What percent of GDP is Xn? -15% -85% 85% Cannot be determined 15%

GDP per capita decreased. (The GDP decline is greater than the population decline.)

If GDP declined by 6 percent in real terms during one year, and population declined by 3 percent, then -real GDP increased while nominal GDP decreased. -GDP per capita increased. -GDP per capita decreased. -GDP did not change at all. -prices went down by 3 percent.

Approximately 23%

If GDP goes from 1.3 trillion to 1.6 trillion in one year. What is its rate of change? -Approximately 5% -Approximately 19% -Approximately 23%

110 (The equation is Nominal GDP = Real GDP * deflator. So just divide both sides of the equation by Real GDP to isolate the Deflator. The Deflator equals the Nominal GDP divided by the Real GDP. 10,000 billion / 9,090 = 110 This means that the price level went up by 10%)

If GDP is 10,000 billion (10 trillion), and real GDP is 9090 billion, then what is the deflator? 90 110 91 09

6.1 Trillion (Remember to subtract imports and add exports. Imports must be subtracted because people and business buy goods and services that are not produced in the U.S. Those goods and services cannot be included in the U.S. GDP.)

If consumption spending is $4 trillion, investment is $800 billion, government spending is $1 trillion, imports are $ 600 billion and exports are 900 billion, how much is GDP? -6.1 Trillion -4.3 Trillion -Cannot be determined -7.3 Trillion

It stayed the same. (Nominal GDP includes price inflation. So if nominal GDP doubles and inflation doubles, then the output (Real GDP) is the same. If prices doubled, then the deflator is 200. Remember that 100 is always the base year deflator. If nominal GDP doubled then that means that the GDP INCLUDES an increase in prices. So let's say that GDP went from 10,000 billion to 20,000 billion between those years. Let's set up the equation with the new deflator. 20,000 / 200 = 10,000 So the real GDP did not change.)

If nominal GDP doubled between 1990 and 1995, and prices doubled between 1990 and 1995, what happened to real GDP between 1990 and 1995? -It doubled. -There is not enough information to answer this question. -It increased. -It declined. -It stayed the same.

real GDP has risen. (Nominal GDP includes inflation and any increase in output. The deflator takes the inflation out of nominal GDP leaving just any change in output in the GDP. The GDP without inflation is called Real GDP. Since Nominal GDP increases are greater than the increases in prices, then the output must have increased.)

If nominal GDP increases faster than the GDP deflator, -There is not enough information to determine what happens to real GDP. -real GDP has stayed the same. -real GDP has risen. -real GDP has fallen.

2% (The increase in nominal GDP from the base is 600 billion (10.6 trillion - 10 trillion). 600 billion divided by 10,000 billion (10 trillion) is 6%. Read GDP (output only) has risen 400 billion (10.4 trillion - 10 trillion). 400 billion divided by 10,000 billion (10 trillion) is 4 %. So 6% = 4% + 2%.)

If nominal GDP rises from $10 trillion to $10.6 trillion and real GDP rises from $10 trillion to $10.4 trillion, find the percentage change in the GDP deflator. 6% 10% -2% 2%

risen by 25 percent.

If the GDP deflator is now 125, we may conclude that since the base year prices have -fallen by 125 percent. -risen by 125 percent. -fallen by 25 percent. -risen by 25 percent.

fallen by 25%

If the GDP deflator is now 75, we may conclude that since the base year prices have -fallen by 75% -increased by 75% -increased by 25% -fallen by 25%

deflation (If the nominal (stated) GDP for 2015 was the same as the real GDP in 2014 and output production increased in 2015, then there must be been a decrease in prices. That decrease is deflation. Remember that REAL GDP focuses solely on the changes in output. It is stripped of inflation or deflation. Nominal GDP is a measurement of the changes in output AND changes in prices. Nominal GDP / Deflator = Real GDP)

If the nominal GDP did not change in 2015 compared to 2014 but output production increased in 2015 compared to 2014, we can conclude that _______ occurred in 2015. -inflation -deflation -hyperinflation -Cannot be determined

inflation occurs in an economy. (Nominal GDP includes potential inflation or deflation. So, if there is inflation, that means that nominal GDP will grow faster than Read GDP. Read GDP does not include any changes in the price level.)

Nominal GDP will grow faster than real GDP if -unemployment occurs in an economy. -imports exceed exports in an economy. -cost of production declines. -deflation occurs in an economy. -inflation occurs in an economy.

by Americans and foreigners within our borders.

Our GDP includes all the output produced -by Americans within our borders. -by Americans and foreigners within our borders. -by Americans within our borders and by American--owned, multinational companies with offices and factories abroad. -by Americans within our borders and abroad.

10.3 trillion (a deflator of 97 means that prices have gone down by 3%. The base year is always at 100.)

Suppose that GDP fell from 11 trillion in 2008 to 10 trillion in 1009 and the deflator is 97. What is the approximate real GDP in 1009? -5.1 trillion -10.3 trillion -9.7 trillion -11.3 trillion

5%

Suppose the nominal GDP rate of change is 2% and the deflator rate of change is -3%. What would be the percentage change for real GDP? 5% -5% Cannot be determined -1%

0% (Nominal GDP % Change = Real GDP % change + Inflation (deflation) % Change So if nominal GDP % change = 5% and real GDP % change = 5%, then that means that there was no inflation or deflation. Nominal GDP is a measurement of the nation's production and any change in pricing. Real GDP is the production of the nation only. It strips away inflation (increase in price) or deflation (decrease in price.))

Suppose the nominal GDP rate of change is 5%, the real GDP rate of change is 5%. What would be the deflator percentage change? -10% -Cannot be determined -5% -0%

7%

Suppose the real GDP rate of change is 3% and the deflator rate of change is 4%. What would be the percentage change for nominal GDP? 7% -1% -7% 1%

Nominal GDP increases faster than real GDP. (GDP is nominal GDP which includes inflation. Real GDP only measures the increase or decrease of output.)

When there is inflation -Nominal GDP and real GDP increase at the same rate. -Nominal GDP increases faster than real GDP. -there is no way of telling whether nominal GDP or real GDP increases faster. -real GDP increases faster than nominal GDP.

steel

Which of the following is the best example of an intermediate product NOT added to GDP? -Steel -Bread -An automobile -A road -A TV set

Government removing more litter

Which of the following would increase GDP? -Additional leisure time -More imports -People engaging in more "do-it-yourself" projects -Government removing more litter

None of the choices are correct.

Which one of the following is taken into account by GDP? -Leisure time -Household production -None of the choices are correct. -Illegal production

In recent years net exports have been negative.

Which statement is true? -Business investment is the largest sector of GDP. -In recent years net exports have been negative. -None of the statements are true. -Government spending is the largest sector of GDP.