Question

1. A country in which a substantial amount of the factories and stores that produce domestic goods and services are foreign-owned is most likely a country in which A) GDP is much larger than GNP. B) GNP is much larger than GDP. C) GDP is roughly equal to GNP. D) the relationship between GDP and GNP no longer exists. Table Real and Nominal GDP video games energy drinks year 1 price 40 year 1 output 100 500 year 2 price 2.5 year 2 output 120 550 Year 3 price 45 2.5 year 3 output 150 600 l 2. Based on the table "Real and Nominal GDP," if year one is the base year, then the real GDP in year two, is A) 5000 B) 5250 C) 5900 D) 6175 E) none of the above Table 2.4 2011 2012 Nominal GDP Real GDP $555 million $480 million $610 million $575 million 3) Refer to Table 2.4. The GDP deflator for 2011 is A) 86.5. B) 115.6. C) 135.1. D) 156.3.

Answer 1

1. A country in which a substantial amount of the factories and stores that produce domestic goods and services are foreign-owned is most likely a country in which GDP is much larger than GNP. Hence, option(A) is correct.

2. Year one is the base year.

Real GDP in year 2 = (Year 1 price of video games )(Year 2 output of video games) + (Year 1 price of energy drinks)(Year 2 output of energy drinks)

= (40)(120)+(2)(550)= $(4800+ 1100)

= $5900

Hence, option(C) is correct.

3. GDP deflator for 2011 = (Nominal GDP in 2011/ Real GDP in 2011)100  

= (555 million/480 million)100 = 115.6

Hence, option(B) is correct.