Question

a $900 ECON 250 40. In a certain economy in 2008, GDP amounted to $5,000, consumption amounted to $3.000, govem punch investment and the value of exports exceeded the value of imports by $200. It follows that investment a n d to b. SI,100 c. $1,250 d. $1,325 41. Which of the following statements about GDP is correct? a. Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process b. Nominal GDP consistently underestimates the value of production, whereas real GDP consistently overestimates the value of production Nominal GDP values production at current prices, whereas real GDP values production at constant prices d. Nominal GDP values production at constant prices, whereas real GDP values production at current prices Table#2 Year Quantity of Watches 50 Prices and Quantities Price of Quantity of Magazines Magazines 180 $2 200 $3 220 Price of Sandwiches $3 $4 $5 Quantity of Sandwiches 100 120 150 Si 2006 2007 2008 Price of Watches S35 $45 S40 100 200 42. Refer to Table 2. Nominal GDP of those three years are: a. $2.230 for 2006, $4,060 for 2007, and $7.670 for 2008. c. $760 for 2006, $1,100 for 2007, and $1,600 for 2008. $2,230 for 2006, 55,380 for 2007, and 59.410 for 2008 d. 8960 for 2006, S1,280 for 2007, and $1,300 for 2008, 43. Refer to Table 2. Using 2006 as the base year, real GDP of those three years are: a. $2,230 for 2006. $4,060 for 2007, and $7,670 for 2008. b. $2,230 for 2006, $5,380 for 2007, and $9.410 for 2008. c. $760 for 2006, $1,100 for 2007, and $1,600 for 2008. d. $960 for 2006, $1,280 for 2007, and $1,300 for 2008. 44. Refer to Table #2. Using 2006 as the base year and using your results of above questions, GDP deflators of those three years are: a. 145% for 2006, 97% for 2007, and 100% for 2008. b. 70% for 2006, 103% for 2007, and 100 for 2008. C. 100% for 2006, 132.51% for 2007, and 122.69% for 2008. d. 100% for 2006,75.46% for 2007, and 81.51% for 2008. 45. Refer to Table# 2. Using 2006 as the base year and using your results of above questions, the economy's inflation rate between 2007 and 2008 is b. 2.91 percent. a. -2.91 percent. d. -7.41 percent c. 7.41 percent.

Answer 1

40) GDP = consumption + Govt. expenditure + investment + (Exports - Imports)

5000 = 3000 + investment + investment + 200

investment = 1800/2 = 900

41) c) nominal GDP values production at current prices and real GDP values production at constant prices.

42) b)

Nominal GDP of ith year = quatity sold * price of that good in ith year

nominal GDP of 2006 = 3*100 + 1*180 + 35*50 = 300 + 180 + 1750 = 2230

nominal GDP of 2007 = 4*120 + 2*200 + 45*100 = 480 + 400 + 4500 = 5380

nominal GDP of 2008 = 5*150 + 3*220 + 40*200 = 750 +660+8000 = 9410

43) a)

real GDP of ith year = quatity sold in ith year* price of base year (which is 2006)

real GDP of 2006 = 3*100 + 1*180 + 35*50 = 300 + 180 + 1750 = 2230

real GDP of 2007 = 3*120 + 1*200 + 35*100 = 360 + 200 + 3500 = 4060

real GDP of 2008 = 3*150 + 1*220 + 35*200 = 450 + 220 + 7000 = 7670

44) c)

GDP deflator = (nominal GDP/ Real GDP)*100

for 2006 = 2230/2230 = 1 = 100%

for 2007 = 5380/4060 = 1.3251 = 132.51%

for 2008 = 9410/7670 = 1.2269 = 122.69%

45) d)

inflation rate = [(2008 deflator - 2007 deflator)/2007 deflator]*100

= [(122.69 - 132.51)/132.51]*100

= -7.41076