Econ 8.3
How does real GDP deal with the problem inflation causes with nominal GDP?
ALL of the Above
"If a recession is so severe that the price level declines, then we know that both real GDP and nominal GDP must decline."
Agree. If both output and prices are falling, then both real GDP and nominal GDP will fall.
"If real GDP stayed the same while nominal GDP declined between 2008 and 2009, then the GDP deflator must also
Agree. If nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined.
An article in the New York Times discussed the views of then Canadian Minister of Finance Joe Oliver on the effect of falling oil prices on the Canadian economy. According to the article, Oliver argued that "lower oil prices would have a broadly neutral impact on real...gross domestic product, but have a negative effect on nominalGDP." Source: Scott Haggett, "Canada Pushes Back Budget to April Due to Market Instability," New York Times, January 15, 2015. Oliver must be expecting the effect of lower oil prices to
lower the inflation rate, which would offset the reduction in nominal GDP.
In an economy with rising prices, compared to the base year,
nominal GDP is larger than real GDP in years after the base year.
If the GDP deflator in 2012 has a value of 98.0, then
prices have decreased 2 percent between the base year and 2012
Why does inflation make nominal GDPLOADING... a poor measure of the increase in total production from one year to the next?
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in prices and partly to changes in quantities
Indicate whether you agree or disagree with the following statements. "If nominal GDP is less than real GDP, then the price level must have fallen during the year."
Disagree. Nominal GDP is less than real GDP if the current price level is less than the base year price level. A fall in the price level during the year is neither necessary nor sufficient to cause nominal GDP to be less than real GDP.
"Whenever real GDPLOADING... declines, nominal GDPLOADING... must also decline."
Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise.
How is the GDP deflator calculated?
GDP deflator= (Nominal GDP/ Real GDP)x 100
The percentage change in the real GDP between the two years. Between 2019 and 2020, the percentage change in real GDP between the two years was
More information, such as the value for nominal GDP, is needed to answer this question.
Over time, prices may change relative to each other. To take this change into account, the Bureau of Economic Analysis calculates
Real GDP using chain weights.
As of 2019, 19 countries in Europe had adopted the euro as their common currency. These countries are called the euro zone. According to an article in the Wall Street Journal, "The European Union's statistics agency said the combined GDP of the eurozone's 19 members increased by an annualized 1.5% in the three months throughMarch." Source: Paul Hannon, "In Show of Resilient Global Growth, Europe Regains Momentum," Wall Street Journal, April 30, 2019. Is it likely that the article is referring to the growth in nominal GDP or the growth in real GDP? Briefly explain.
Real GDP, because it shows how the economy's overall production of goods and services changes over time.
Real GDP is
The value of goods and services evaluated at base year prices.
Suppose that the GDP deflator for the United States increases from 115 to 120 between 2019 and 2020. Briefly explain what this information tells you about: i. The percentage change in the overall price level between the two years. Between 2019 and 2020, the overall price level measured by the GDP deflator increased by _____ percent. (Enter your response rounded to two decimal places.)
To calculate the percentage change, use the formula: (new price- old price/ old price)x 100 ((120-115)/115)x100=4.347 round two places so we get 4.35
If prices rise over time, then real GDP will be
larger than nominal GDP in years before the base year.
