Question

Suppose that 25 years ago a country had nominal GDP of 1000, a GDP deflator of 200, and a population of 100. Today, that country has a nominal GDP of 3000, a deflator of 400, and a population of 150. What happened to the real GDP per person? O alt rose, but less than doubled O b. It did not change O c. It more than doubled Od. It fell

Answer 1

Answer : 1) The answer is option b.

25 years ago :

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

=> Real GDP = (1000 / 200) * 100

=> Real GDP = 500

Per person real GDP = Real GDP / Population = 500 / 100 = 5

Today :

Real GDP = (3000 / 400) * 100

=> Real GDP = 750

Per person real GDP = 750 / 150 = 5

Now we can see that the per person real GDP is same for both today and 25 years ago.

Hence except option b other options are not correct. Therefore, option b is the correct answer.

2) The answer is option d.

Here Makena's purchase from Canadian shop in France increases the consumption level of Canada. This means that Makena is a Canadian. This decrease the export of Canada without changing import. As a result, the net export (export - import) decrease at a particular amount. But this particular amount will be added in Canadian consumption spending. GDP include both consumption spending and net export. As here the net export decreases by a particular amount and this particular amount is added in consumption spending hence GDP will not change. Hence except option d other options are not correct. Therefore, option d is the correct answer.