Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. Show transcribed image text. D) show how nominal GDP is distinct from real GDP. A nation's standard of living, as measured by real GDP per person, increases: a. Conversely, Real GDP reflects current GDP at past (base) year prices. If real GDP decreased, then there are really only two possibilities: Q 57 Q 57. b. quantity of goods and services produced increases. Table 2 There are only two goods in this economy. C) only if the price level falls. B) employment rate rises. Wages, salaries, and supplementary labour income, Government expenditures on goods and services, Personal income taxes net of transfer payments, Interest and miscellaneous investment income, 5) [***QUESTION NUMBER 5 WAS NOT COUNTED***], 6) Refer to Table 1. Here’s a chart of quarterly percent change in nominal (red) and real (blue) GDP. The nominal GDP is the value of all the final goods and services that an economy produced during a given year. A) show the payment flows for final goods and services and factors of production between different sectors. The CPI differs from the GDP deflator in two important ways. D. Only when output increases. Real GDP would increase, but the extra expenditure in the economy was due to an increase in something “bad,” so economic well-being would likely be lower. When Australian real GDP increases,Australian imports A)increase by more than the change in real GDP. Course Hero is not sponsored or endorsed by any college or university. During inflationary times, when prices increase significantly, nominal GDP will also increase, thus sending a false signal of a performing economy, when people’s standard of living will not benefit from this increase in GDP. Real GDP will increase A) only if the price level rises. It was the only decade since records started in 1930 without at least several years of 4 percent or better growth. B) Only If The Price Level Falls. B. Nominal GDP On the other hand, nominal GDP refers to the value of goods and services measured at the current market prices, i.e., it uses the actual prices paid at any point in time. If you’re involved in the business – as a business owner or as … Real GDP will increase: A) only if the price level rises. According to Jeffrey Lacker, two fundamental factors contribute to GDP growth in the long term—population growth and real GDP per worker. When a country's real GDP is stable or increasing, companies can afford to hire more people and pay higher wages. D) if either the price level rises or the quantity of final goods and services produced rises. Use the table below to answer the following questions. E) show the effects of inflation in a simple economy. Only If The Price Level Falls Only If The Quantity Of Final Goods And Services Produced Rises If Either The Price Level Rises Or The Quantity Of Final Goods And Services Produced Rises. Juice = ($8 * 130) + ($10 * 110) + ($11 * 90) = $3130 3. D. if either the price level rises or the quantity of final goods and services produced rises. 96) Real GDP will increase A) only if the price level rises. 17. Although GDP is total output, it is primarily useful because it closely approximates the total spending: the sum of consumer spending, investment made by industry, excess of exports over imports, and government spending. During those years, only four years -- 1980, 1982, 1991, 2009 -- experienced negative GDP growth. c. C. only if average labor productivity increases. First, have more people working. D) quantity of goods and services produced increases. During a recession, fewer goods and services are being sold, business profits decline, government tax … C) only if the quantity of final goods and services produced rises. Sciences, Culinary Arts and Personal c. unemployment rate rises. In other words the percentage increase in nominal GDP is (approximately) equal to the percentage increase in prices plus the percentage increase in real GDP. e. employment rate falls. Macro Topic 2.6 Real v. Nominal GDP Part 1: Check Your Understanding-Answer the questions. 4. Real Gross Domestic Product or real GDP explains the change in price because of inflation. Nominal GDP reflects current GDP at current prices. “Domestic” means that the measurement of GDP contains only products from within its borders. Real GDP is used to compute economic growth. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. Real GDP will increase: a. if either the price level rises or the quantity of final goods and services produced rises b. only if the price level falls B)increases by less than a dollar. Another factor that’s a prime contributor to real GDP growth in an economy is the real GDP per worker estimate. Choose the one alternative that best completes the statement or answers the question. Since real GDP is expressed in 2005 dollars, the two lines cross in 2005. Given the GNP and GDP, how do you calculate... 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Real GDP = $10 trillion; Only due to inflation it can be seen that the nominal GDP was up by 10%. B) explain how the prices of factors are determined. Per capita real GDP, which is the real GDP divided by the population size, regularly measures the standards of living of the citizens of a given country. 1 million cars valued at 2010 average price of $10,000). The year 2008 had zero GDP growth. These shifts in demand will negatively impact the real GDP. Vegetables = ($10 * 200) + ($11 * 220) + ($13 * 230) = $7410 2. Still, the circular flow still teaches us something very important. This would be the biggest quarterly GDP gain on record, with the previous high of 16.7% set in the fourth quarter of 1949. D) If Either The Price Level Rises Or The Quantity Of Final Goods And Services Produced Rises. See the answer . By removing inflation as a variable, real GDP can tell economists if a nation’s economy is growing, shrinking, or remaining constant. All rights reserved. B. only if the price level falls. We are not going to answer that question in this chapter—after all, we are still at the very beginning of your study of macroeconomics. Real GDP will increase. That means that real GDP growth reflects a country’s increased output and is not influenced by inflation increasing price level. Here's how to calculate the GDP growth rate . The annual growth rate of real Gross Domestic Product (GDP) is the broadest indicator of economic activity -- and the most closely watched. This problem has been solved! E) average level of prices rises. You need to use real GDP so you can be sure you’re calculating real growth, not just price and wage increases. d. employment rate rises. Assuming the people chose to increase their work effort and forgo the extra leisure, economic well-being would increase as well. 4. Real GDP. C) only if the price level falls. D) if either the price level rises or the quantity of final goods and services produced rises. C) show the stocks of various sectors of the economy. b. Calculate the Real GDP and Growth Rate of Real GDP and Nominal GDP using the following information. However, using nominal GDP to measure the size of an economy may not always be the best approach. If … B. only if the share of the population employed decreases. Real GDP is also used to compute economic growth, known as the GDP growth rate. Thus, real GDP is almost always slightly lower than its equivalent nominal figure. Answer to: Real GDP will increase A. only if the price level rises. The ideal GDP growth rate is between 2-3%. C. only if the quantity of final goods and services produced rises. 1 A oftheeconomy B explainhowthep. This preview shows page 1 - 3 out of 12 pages. The change was 0.3 percentage point higher than the “second” estimate released in November. B) only if the price level falls. 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