ECO 304L Chapter 10: 10.4 Real vs. Nominal GDP

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greenwalrus59

1 Feb 2017

School

UT-Austin

Department

Economics

Course

ECO 304L

Professor

M O S T A S H A R I, S H A L A H

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Document Summary

If total spe(cid:374)di(cid:374)g rises fro(cid:373) o(cid:374)e (cid:455)ear to the (cid:374)e(cid:454)t at least o(cid:374)e of the follo(cid:449)i(cid:374)g is true : the economy is producing a larger output of goods and services, goods and services are being sold at higher prices. Economists want to measure the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. Nominal gdp: the production of goods and services valued at current prices. Real gdp: the production of goods and services valued at constant prices. To sum up: no(cid:373)i(cid:374)al gdp uses curre(cid:374)t prices to place a value o(cid:374) the eco(cid:374)o(cid:373)y"s productio(cid:374) of goods a(cid:374)d services. Real gdp uses constant base-(cid:455)ear pri(cid:272)es to pla(cid:272)e a (cid:448)alue o(cid:374) the e(cid:272)o(cid:374)o(cid:373)(cid:455)"s production of goods and services. Because real gdp is not affected by changes in prices, changes in real gdp reflect only (cid:272)ha(cid:374)ges i(cid:374) the a(cid:373)ou(cid:374)ts (cid:271)ei(cid:374)g produ(cid:272)ed.

Related Questions

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Apples		Muffins
	Price	Quantity	Price	Quantity
	(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2008	1	150	2	160
2009	2	135	4	230
2010	3	110	4	165

Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP
Year	(Dollars)	(The base year 2008, dollars)
2008
2009
2010

1. From 2009 to 2010, nominal GDP (decreased or increased), and real GDP (decreased or increased).

2. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

A. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

B. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

C. Real GDP is not influenced by price changes, but nominal GDP is.

magentamarten240

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
Year	(Dollars)	(Base year 2010, Dollars)	GDP Deflator
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.

lilacpig169

ECO 304L Chapter 10: 10.4 Real vs. Nominal GDP

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