ECON 104 Study Guide - Midterm Guide: Gdp Deflator, Hyperinflation, Disinflation
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1.
Given nominal GDP of $4.2 trillion and a GDP Deflator is 120, we can conclude that real GDP is equal to:
A. | $3 Trillion. | |
B. | $3.5 Trillion. | |
C. | $3.9 Trillion. | |
D. | $5.2 Trillion. |
2.
Say real GDP is $9.2 trillion. If personal consumption is $5.1 trillion, investment is 1.8 trillion, and government purchases are 2.5 trillion, then:
A. | personal consumption is less than exports. | |
B. | exports exceed imports by $0.2 trillion. | |
C. | imports are equal to exports. | |
D. | imports exceed exports by $0.2 trillion. |
3. If nominal output is $4.2 trillion and the GDP Deflator is 5 percent higher than its base year, then real output is:
4. If the CPI in 1979 was 72.6 and it was 82.4 in 1980, then the inflation rate from 1979 to 1980 was?
5. Housing comprises roughly 40% of the market basket in the CPI. If the price of housing rises 15% in one year while the other components in the CPI rise by 10%, the CPI will rise by 12%. True or False?
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 Ā |
Oranges Ā |
||
---|---|---|---|---|
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 | Ā | Ā | Ā |
2011 | Ā | Ā | Ā |
2012 | Ā | Ā | Ā |
Ā
B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.
Ā
C. The inflation rate in 2012 was ____________.
Ā
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.
Consider a simple economy that only produces two goods; apples and oranges. The following table shows prices and quantities over a 3 year period.
Ā |
Price of |
Quantity of |
Price of |
Quantity of |
YEAR |
Apples |
Apples |
Oranges |
Oranges |
2012 |
2 |
20 |
1 |
10 |
2013 |
3 |
24 |
2 |
12 |
2014 |
4 |
30 |
3 |
20 |
Use the information from the previous table to fill out the following table:
Ā | Ā |
Real GDP |
GDP |
YEAR |
Nominal GDP ($) |
(The base year 2012)($) |
Deflator |
2012 |
Ā | Ā | Ā |
2013 |
Ā | Ā | Ā |
2014 |
Ā | Ā | Ā |
Choose one from each:
From 2013 to 2014, nominal GDP (increased or decreased) and real GDP (increased or decreased).
The inflation rate in 2014 was (10%, 40.6%, 29.4%, -28.9%, or -9.1%).
Why is real GDP a more accurate measure of an economyĆ¢ĀĀs production than nominal GDP?