Macro - 19.2 Adjusting Nominal Values to Real Values and Tracking Real GDP Over Time

Which of the following tracks the pattern of recessions and expansions over time? growth trend the business cycle peak/trough cycle economic growth

the business cycle The term business cycle refers to the recurrent ups and downs in real GDP over several years. We call the highest point of the economy, before the recession begins, the peak. Conversely, the lowest point of a recession, before a recovery begins, is the trough. Thus, a recession lasts from peak to trough, and an economic upswing runs from trough to peak. We call the economy's movement from peak to trough and trough to peak the business cycle.

Within an economy's business cycle, what is the lowest point of a recession called? peak recovery trough upswing

trough We call the highest point of the economy, before the recession begins, the peak. Conversely, the lowest point of a recession, before a recovery begins, is the trough. Thus, a recession lasts from peak to trough, and an economic upswing runs from trough to peak. We call the economy's movement from peak to trough and trough to peak the business cycle.

True or false? Depression and recession can be used interchangeably.

False Depression and recession cannot be used interchangeably because they refer to different economic situations. We call a decline in real GDP that typically lasts at least two consecutive quarters a recession. We call an especially lengthy and deep recession a depression. The severe drop in GDP that occurred during the 1930s Great Depression is clearly visible in the figure, as is the 2008-2009 Great Recession.

A(n) ______ is an especially lengthy period, where real GDP experiences a severe drop. recession economic boom stagnation depression

depression We call a decline in real GDP that typically lasts at least two consecutive quarters a recession. We call an especially lengthy and deep recession a depression. The severe drop in GDP that occurred during the 1930s Great Depression is clearly visible in the figure, as is the 2008-2009 Great Recession.

Suppose that a new technology increases productivity and causes aggregate supply to increase and also increase the price level to 102 while nominal GDP increased to $15,000. What is real GDP? Round your answer to the nearest hundredth.

$14,705.88

Calculate real GDP (in billions of dollars) in 2016. Round your answer to the nearest tenth. Nominal GPD: $18,707 GPD Deflator: 12.19

$16,674.4 To calculate real GDP, use the formula: Real GDP =Nominal GDPPrice Index/100 The GDP Deflator is also known as the price level, so Real GDP in 2016 =$18,707112.19/100 ​​​ Real GDP in 2016 =$18,7071.1219=$16,674.4

Nominal GDP in 1990 was $40,000, and in 2000 it was $35,000. The GDP deflator was 102 in 1990, and in 2000 it was 95. What was real GDP in 1990? Round your answer to the nearest hundredth.

$39,215.69

Businesses become more optimistic and increase business expenditures on investment, causing real GDP to increase from $17,500 to $20,000. What is the percent change in real GDP? Round your answer to the nearest tenth.

14.3%

A new pandemic wipes out most of humanity and decreases worldwide real GDP by $20,000 from $85,000. What is the percentage change in real GDP? Be sure to: Round your answer to the nearest tenth. Include a negative sign if necessary.

23.5%

The national savings rate decreases causing aggregate demand to increase and pushing real GDP from $55,000 to $70,000. What is the percent change in real GDP? Round your answer to the nearest hundredth.

27.27% To find the real growth rate, we apply the formula for percentage change: New GDP - Old GDPOld GDP×100=% change In this case, real GDP increased, so the percent change is positive, 70,000-55,00055,000×100=27.27%

Real GDP increases from $22,000 to $34,000 due to an increase in government expenditures on military projects. What is the percent change in real GDP? Round your answer to the nearest hundredth.

54.55% To find the real growth rate, we apply the formula for percentage change: New GDP - Old GDPOld GDP×100=% change In this case, real GDP increased, so the percent change is positive, 34,000-22,00022,000×100=54.55%

Which of the following terms refers to the commonly referenced value of a good or service that is not adjusted for inflation? trade balance real gross domestic product nominal value real value

nominal value By definition, nominal value is the value of a good or service that is not adjusted for inflation. The nominal value of any economic statistic means that we measure the statistic in terms of actual prices that exist at the time.

Which term refers to the value of a good or service after adjusting for changes in inflation? real value nominal value standard of living nominal gross domestic product

real value The nominal value of any economic statistic means that we measure the statistic in terms of actual prices that exist at the time. The real value refers to the same statistic after it has been adjusted for inflation. Generally, it is the real value that is more important.