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Answer the following questions: Use these data to answer the associated questions. Be sure to answer the questions as completely as you can. If calculations are requested, show your work! 

Action Items 2000 2001 2002 2003 2004

Nominal GDP 9817 10128 10469.6 10971.2 11734.3

Real GDP 9817 10320.6 10755.7

GDP Deflator 100 102.4 104.2

Growth rate of nominal GDP 3.2% 4.8% 

Growth rate of real GDP  1.6%  4.2%

CPI 172.2 177.1 179.9 184 188.9

Inflation rate using GDP deflator 2.4%  2.0% 

Inflation rate using CPI  1.58%  2.7%

1. How is the real GDP calculated from the given data? Fill in the missing values of real GDP in the table.

2. How is the growth rate of GDP calculated from the given data? Fill in the missing values of the growth rate of nominal and real GDP in the table.

3. What's the difference between nominal GDP and real GDP? Which one is better for measuring economic well-being?

4. How is the GDP Deflator calculated from the data given? Fill in the missing values of GDP deflator in the table.

5. Explain how to calculate the annual inflation rate.

6. What's the key difference between these two measures of inflation?

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Kritika Krishnakumar
Kritika KrishnakumarLv10
28 Sep 2019

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Related questions

1. Which of the following transactions would add to the value of the U.S. GDP?

A. A college student buys a used car.
B. A college student sells her used textbooks back to the bookstore.
C. A grocery store purchases new freezers made in the United States.

D. U.S. citizen buys a new television manufactured in Asia.

2. The growth rate of real GDP:
A. depends on which year is used as the base year.
B. depends on how quickly prices are rising.
C. is always equal to the rate of growth of nominal GDP. D. is always more than the rate of growth of nominal GDP.

3. Which statement is true about GDP?
A. GDP includes the values of all final and intermediate goods and services.
B. Only the products made by American workers are included in the calculation of the US GDP.

C. Sales of old houses and used cars are included in the calculation of GDP for the current year.

D. In the US, GDP is calculated both annually and quarterly.

4. Which statement is true about GDP growth?
A. The GDP deflator is a measure of economic growth.
B. If we want to compare GDP over time, we should always compare real GDP.
C. Most economists choose nominal GDP growth as a single indicator of economic performance.

D. The GDP deflator tells the quantity change of production.

5. Which of the following is a way to compute GDP?

A. add up the wages paid to all workers

B. add up the quantities of all final goods and services
C. add up the market value of all final goods and services

D. add up the rents paid by all tenants

6. A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called:
A. inventory goods
B. transitory goods

C. final goods
D. intermediate goods

7. Martin, a US citizen, travels to Mexico and buys a newly manufactured motorcycle there. His purchase is included in:

A. both Mexican GDP and US GDP.

B. Mexican GDP, but not in US GDP.

C. US GDP, but not in Mexican GDP.

D. neither Mexican GDP nor US GDP.

8. Which of the following is included in Singapore GDP?

A. The value of production by a Singaporean working in the US.
B. The value of production by an American working in Singapore.
C. The value of production by a Singaporean that crosses the order to work in Malaysia.

D. All of the above are correct.

9. In the equation Y = C + I + G + NX,
A. Y represents the economy's total expenditure.

B. C represents household on durable goods.
C. all of the variables are always positive numbers.

D. All of the above are correct.

10. Consumption consists of spending by households on goods and services, except

purchases of intangible services.

purchases of durable goods.

purchases of new houses.

spending on education.

11. Which of the following is included in government purchase?

A. unemployment benefits a state government pays

B. social security payments the US government makes
C. the services of a US government attorney valued at the cost of her salary

D. All of the above are correct.

12. Transfer payments are:

A. included in GDP because they represent income to individuals.
B. included in GDP because they eventually will be spent on consumption.
C. not included in GDP because they are not payments for currently produced goods or services.

D. not included in GDP because taxes will have to be raised to pay for them.

13. Net exports equal
A. exports plus imports

B. exports minus imports

C. imports minus exports

D.GDP minus imports

14. In the economy of TAMIU in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was TAMIU's consumption in 2015?

A. $830

B. $1230

C. $1370

D. $1770

15. Nominal GDP will increase when

A. prices increase and output increases.
B. prices increase and output decreases.
C. prices decrease and output increases.

D. All of the above are correct.

16. Changes in real GDP reflect:

A. only changes in prices.

B. only changes in the amounts being produced.
C. both changes in prices and changes in the amounts being produced.

D. neither changes in prices nor changes in the amounts being produced.

17. Which of the following is correct?
A. Nominal GDP is always less than real GDP.

B. Nominal GDP is always greater than real GDP.
C. Nominal GDP equals real GDP in the base year.
D. Nominal GDP equals real GDP in all years but the base year.

18. The GDP deflator is the ratio of:

A. real GDP to nominal GDP.

B. real GDP to the inflation rate.
C. real GDP to nominal GDP.
D. nominal GDP to the inflation rate.

19. In 2012 the nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
A. $6.7 billion
B. $10 billion

C. $40 billion D. $100 billion

20. In the base year, the GDP deflator is always equal to A. -1
B. 0
C. 2

D. 1

21. GDP does not reflect:

A. the value of leisure.

B. the value of goods and services produced at home.

C. the quality of the environment.
D. All of the above are correct.

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

A. absolute change in nominal GDP from one period to another.

B. percentage change in nominal GDP from one period to another.

C. absolute change in real GDP from one period to another.
D. percentage change in real GDP from one period to another.

23. The term economists use to describe a situation in which the economy’s overall price level is rising is:

A. economic growth

B. inflation
C. recession
D. business cycles

Use information from the Bureau of Economic Analysis (BEA) website, http://www.bea.gov/, answer question 24 and 25.

24. What is the real GDP growth rate in the 4th quarter of 2015 for the United States?

A. 1%
B. 2%
C. 3%

D. 4%

25. What is the value of real GDP in 1998 for the United States?

A. $11525.9 billion

B. $9089.2 billion

C. $11321.2 billion

D. $8889.7 billion

Calculate the missing data.

Calculate missing data from the table.

Income/Expenditure Flows

Amount (in billions)

Consumption expenditure

$7

Government expenditure

$5

Depreciation

$3

Net taxes

$2

Investment

$4

Net exports

$1

Expenditures

Income

GDP

Calculate the following.

Using the data from a partial set of national income and expenditure data, address the following:

Calculate gross domestic product (GDP) using the expenditure approach.

Determine net domestic product, gross national product (GNP), and statistical discrepancy.

Item

Amount in 2010 (in billions)

Government expenditure (G) =

$8

Consumption expenditure (C) =

$20

Investment (I) =

$5

Net exports (NX) =

$1.5

GDP (expenditure approach)=

Total wages =

$21

Net operating surplus =

$11

Net domestic product =

Indirect taxes minus subsidies =

$3.5

Capital consumption =

$2

GDP (income approach)=

Statistical discrepancy =

Net factor income from abroad =

$5.5

GNP =

Consider the tables.

Given production and price data below, address the following:

Calculate an economy's nominal GDP and real GDP.

In 2000:

Item

Quantity (millions)

Price ($/unit)

Expenditure

(millions of $)

Socks

15

5

75

SIM cards

20

2

40

Defense Budget

9

5

45

Real/Nominal GDP = 160

In 2003:

Item

Quantity (millions)

Price ($/unit)

Expenditure

(millions of $)

Socks

15

5

75

SIM cards

20

5

100

Defense Budget

20

10

200

Nominal GDP =

2003 Quantities valued at 2000 prices:

Item

Quantity (millions)

Price ($/unit)

Expenditure

(millions of $)

Socks

SIM cards

Defense Budget

Real GDP =

Answer the following questions.

How do you measure GDP?

How do you measure real and nominal GDP?

How do you determine Consumer Price Index and what are its limitations?

Which of the following expenditures will be included in GDP which will be excluded from the calculation? Explain your answers.

Spare tires bought by Across America, a car rental company

Textbooks bought by college students

Cabinets purchased by a furniture store

A new car purchased by an NFL player

A cruise ship bought by Carnival

3. Refer to the following data on the U.S. consumer price index and answer the questions below.

Year CPI Year CPI Year CPI Year CPI

1988 118.3 1993 144.5 1998 163.0 2003 184.0

1989 124.0 1994 148.2 1999 166.6 2004 188.9

1990 130.7 1995 152.4 2000 172.2 2005 195.3

1991 136.2 1996 156.9 2001 177.1 2006 201.8

1992 140.3 1997 160.5 2002 179.9

a. Compute the inflation rate for each year 1989-2006.

b. Which years were years of inflation? What do you expect to happen to real interest rates during this time period if nominal rates remain unchanged?

c. In which years did deflation occur? What do you expect to happen to real interest rates during this time period if nominal rates remain unchanged?

d. In which years did disinflation occur?

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