Economics PS 5
In Year 2, nominal GDP is equal to: $83,175 and real GDP is $41,700
A simple economy produces two goods, Pumpkin Pies and Technical Manuals. Price and quantity data are as follows:
Real GDP in 2017 equals $6,680
Consider the following simple economy that produces only three goods:
Briefly explain whether you agree or disagree with the following statement: "I don't believe the government price statistics. The CPI for 2016 was 210, but I know that the inflation rate couldn't have been as high as 110 percent in 2016."
Disagree. The inflation rate is the percentage increase in the price level from the previous year, not the base year.
Briefly explain whether you agree or disagree with the following statement: "I don't believe the government price statistics. The CPI for 2016 was 215, but I know that the inflation rate couldn't have been as high as 115 percent in 2016."
Disagree. The inflation rate is the percentage increase in the price level from the previous year, not the base year.
How is the GDP deflator calculated?
GDP deflator = nominal GDP/real GDP x 100
If the U.S. Bureau of Economic Analysis (BEA) added up the values of every good and service sold during the year, would the total be larger or smaller than measured gross domestic product (GDP)?
Larger: The value of all goods and services sold would include intermediate goods.
How does real GDP deal with the problem inflation causes with nominal GDP?
Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced. Real GDP separates price changes from quantity changes.
$13,125
Suppose that a simple economy produces only the following four goods and services: shoes, hamburgers, shirts, and cotton. Further, assume that all of the cotton is used in the production of shirts. Use the information in the following table to calculate Nominal Gross Domestic Product (Nominal GDP) for 2019.
If the base year is the year 2005, then real GDP for 2012 equals $7600 and the real GDP for 2013 equals $8640
Suppose the information in the following table is for a simple economy that produces only the following four goods: textbooks, hamburgers, shirts, and cotton. Further, assume that all of the cotton is used to produce shirts.
Based on the table, in Year 2, the value of the GDP deflator is 116.7. The inflation rate between Year 1 and Year 2 is 6.1%
The following table gives nominal and real GDP for an economy for two years.
The inflation rate between Year 1 and Year 2 is 9.7% The inflation rate between Year 2 and Year 3 is 16.8%
The monthly market basket for consumers consists of pizza, t-shirts, and rent. The table below shows market basket quantities and prices for the base year (Year 1) and in the following two years.
In Year 1, the CPI for the economy is 100.0 In Year 2, the CPI for this economy is 109.4
The monthly market basket for consumers consists of pizza, t-shirts, and rent. The table below shows market basket quantities and prices for the base year (Year 1) and in the following year.
Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these numbers?
The unemployment rate would decrease and the labor force participation rate would increase.
Why does inflation make nominal GDP 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 quantities.
Which equation represents the relationship between GDP and the four major expenditure components?
Y= C+I+G+NX
The CPI in 2014 equals 140.43 The CPI in 2016 equals 128.72
complete the following table
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. a. you purchase a new ford escape hybrid from a Ford dealer
consumption expenditure
Indicate whether you agree or disagree with the following statement: "In years when people buy few shares of stock, investment will be low and, therefore, so will GDP
disagree; investment as a component of GDP refers to the purchase of physical capital, housing, and inventory, not stock purchases
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. f. the state of missouri builds a new highway to help improve access to the ford escape plant
government expenditure
Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in years after the base year, nominal gdp is ________ real GDP
greater than
The unemployment rate declined from 4.5 percent in March 2017 to 4.4 percent in April. The labor force participation rate also declined from March to April, from 63.0 percent to 62.9 percent. Holding constant the number of people employed in April 2017, if the labor force participation rate had increased instead of decreased, the unemployment rate for April 2017 would be
greater than 4.4 percent because adding the same number to both the numerator and the denominator of a fraction that is less than one increases the value of the fraction
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. e. ford purchases new machine tools to use in its missouri escape factory
investment expenditure
Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in the base year, nominal GDP is ____ real GDP
is equal to
Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in years prior to the base year, nominal GDP _____ real GDP
is less than
Indicate whether each of the following transactions represents the purchase of a final good 2. the purchase of two new elementary school buildings by the state government
is the purchase of a final good
Indicate whether each of the following transactions represents the purchase of a final good 3. the purchase of domestic wine by a French customer
is the purchase of a final good
Indicate whether each of the following transactions represents the purchase of a final good 4. the purchase of a new machine tool by the Ford Motor Company
is the purchase of a final good
identify whether the following topics belong in microeconomics or macroeconomics how will an increase in government spending impact the inflation rate?
macroeconomics
identify whether the following topics belong in microeconomics or macroeconomics identify the best measurement of total output in the US economy
macroeconomics
identify whether the following topics belong in microeconomics or macroeconomics how does the price of corn change if the price of wheat increases
microeconomics
identify whether the following topics belong in microeconomics or macroeconomics the most efficient market structure is perfect competition
microeconomics
the difference between microeconomics and macroeconomics is
microeconomics studies smaller parts of the economy such as markets and individuals, while macroeconomics studies the economy as a whole
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. d. ford produces 1,000 escapes in a factory in missouri and ships them to a car dealer in shanghai, china
net export expenditure
suppose a house is built and sold in the year 2008. if the house is resold in the year 2019, is the value of the house included in the GDP for 2019?
no, GDP for 2019 includes only production that occurs during 2019
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. b. you purchase a 2013 (preowned) ford escape hybrid from a friend
not included in GDP calculation
Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. c. ford purchases door handles for the escape from an auto parts manufacturer in indiana
not included in GDP calculation
Indicate whether each of the following transactions represents the purchase of a final good 1. the purchase of steel from a steel mill from an automobile manufacturer
not the purchase of a final good
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment.
Transfer payments are not included in GDP calculations because
transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.
would the services of a real estate agent who helped sell (or helped buy) the house be included in GDP for 2019?
yes GDP for 2019 includes the market value of final goods and services. this includes real estate services
What are the four major components of expenditures in GDP?
Consumption, Investment, Government Purchases, and Net Exports
