Chapter 25

The U.S. produces and sells millions of types of products. To add them up to a single aggregate, each good is weighted by its:

market price.

Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?

$11.4 trillion

If nominal GDP is $10 trillion and real GDP is $11 trillion, the GDP deflator is:

91.

An individual sells her house on her own.

GDP will not change

Government increases Social Security payments.

GDP will not change

Stock prices rise by 20 percent.

GDP will not change

An individual sells his house through a broker.

GDP will rise

If an economy has a trade surplus, total domestic production is _____ total domestic expenditures.

Greater than

What makes it difficult to compare GDP over time? How is the problem addressed?

Inflation. It is addressed by estimating price changes over time.

An increase in nominal GDP implies an increase in:

either the price level or output or both.

GDP is the:

market value of an economy's production of final goods and services in a one year period.

If you add up all the transactions in an economy, do you arrive at GDP, GNP, or something else?

Something else because intermediate goods are included

A change in business inventories is:

counted in GDP as investment.

If an economy produces 100 pencils valued at $0.25 each and 500 sheets of ruled paper at $0.01 each, using GDP as the measure of output:

pencils are weighted as being 25 times more important than ruled paper.

If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3 billion to $4 billion, it follows that:

real output rose and price level fell.

Suppose that both nominal GDP and prices double. We can conclude that real output:

remained constant.