14) The business cycle is defined as the A) regular growth rate of the real GDP. B) irregular fluctuations of real GDP around potential GDP. C) regular fluctuations of real GDP below potential GDP. D) periodic and regular up-and-down movement of total production E) irregular fluctuations of prices around real GDP.
Related textbook solutions
Related questions
7. The difference between nominal GDP and real GDP is that nominal GDP:
| A. |
measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years. |
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| B. |
is measured in dollar terms, whereas real GDP is measured in terms of numbers of goods and services produced |
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| C. |
measures the total value of only final goods and services, whereas real GDP measures the value of all goods and services, both intermediate and final |
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| D. |
measures a country's production of final goods and services at fixed prices, whereas real GDP measures a country's production of all final goods and services at current market prices |
Real versus nominal GDP
Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.
| Year |
Apples
|
Oranges
|
||
|---|---|---|---|---|
| Price | Quantity | Price | Quantity | |
| (Dollars per apple) | (Number of apples) | (Dollars per orange) | (Number of oranges) | |
| 2010 | 1 | 120 | 1 | 195 |
| 2011 | 2 | 130 | 4 | 195 |
| 2012 | 4 | 130 | 4 | 145 |
A. Use the information from the previous table to fill in the following table.
| Year | Nominal GDP | Real GDP | GDP Deflator |
|---|---|---|---|
| (Dollars) | (Base year 2010, Dollars) | ||
| 2010 | |||
| 2011 | |||
| 2012 |
B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.
C. The inflation rate in 2012 was ____________.
D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?
a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
b. Real GDP includes the value of exports, but nominal GDP does not.
c. Real GDP is not influenced by price changes, but nominal GDP is.
