Review of Chapter 23

Which of the following transactions will not affect GDP?

• a. Jeff cleans his house

• b. Fatema buys a used computer

• c. The government builds a new road

• d. both a and b

Which of the following is not included in GDP? 

• carrots grown in your garden and eaten by your family

• carrots purchased at a grocery store and eaten by your family

• none of the above are included in GDP

GDP is the market value of all intermediate and final goods and services produced in a country in a given period of time

• True

• False

When economists talk about growth in the economy, they measure that growth as the

• absolute change in nominal GDP from one period to another

• percentage change in nominal GDP from one period to another

• absolute change in real GDP from one period to another

• percentage change in real GDP from one period to another

  Below is a table with some data from the land of milk and chocolate. Refer to the table for questions a to c:

a. How high is nominal GDP in 2010?

b.     How much did nominal GDP increase from 2010 to 2011 (nominal growth rate)?

c.      Using 2010 as a base year (using 2010 prices), calculate real GDP for 2012

 

The country of Sportsville produces two goods: footballs and basketballs. Below is a table showing prices and quantities of output for three years: (year 1 is the base year)

a.     What is Nominal GDP in year 1?

b.     What is Real GDP in year 2?

c.      What is the GDP deflator in year 3?

Below is a table with some data from the land of milk and honey:

a.     How high is nominal GDP in 2010?

b.     How much did nominal GDP increase from 2010 to 2011?

c.      Using 2010 as a base year (using 2010 prices), calculate real GDP for 2012.

d.     What is the difference between nominal and real GDP? Which measure is more meaningful to determine the health of an economy? Explain.