Question

1. Corporate profit isn't included in GDI because corporations aren't people.

A) True

B) False

2. The monthly inflation rate for the U.S. was 2.3% in March 2018 and 2% in April 2018, so the price level must have fallen between these times.

A) True

B) False

3. If you know the year t GDP deflator and the year t nominal GDP for some country, then you can compute that country's real GDP in year t.

a) true

b) false

Answer 1

1) Answer- False

Reasoning- Gross Domestic Income (GDI) can be defined as the summation of all the income earned in the process of production of goods and services of the home country. Gross Domestic Income is calculated as follows-

GDI = Compensation to employees + rent + Interest + Proprietor's income + Corporate Profits

Corporate Profits are included in the calculation of GDI.

------

2) Answer - (a) True

Reasoning- When there is a fall in inflation rate or deflation, it is due to the fall in price level because of excess supply of goods in the economy. So between March and April 2018, there was a deflation in US and deflation happens when price level falls.

------

3) Answer- (a) True

Reasoning- GDP Deflator is a tool to measure price inflation in an economy. It is calculated by the following formula-

NominalG DP GDP Deflator 100 RealGDP

If we have the values of GDP Deflator and Nominal GDP for year t, then by putting the values of these in the above formula, Real GDP for year t can be computed.

-----------------------