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Exam 20: GDP and the Price Level

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Question 51

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Inflation is an increase in:

A) the price of a particular product.
B) the average price level in an economy.
C) the rate at which the price of a good rises.
D) output beyond the full-employment level.

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Question 52

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Which of the following transactions would NOT be included in GDP?

A) A business buys a new printer.
B) Someone buys existing shares of stock.
C) A government buys new military uniforms.
D) A sick person buys medical services.

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Question 53

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What time period is typically used for GDP measurements?

(Table 2: Data for Macroland, 2018) Table 2 provides economic data for Macroland. What are Macroland's net exports? $\begin{array}{l}\text { Table 2: Data for Macroland. } 2018 \text { (in billions of dollars) }\\\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Imports } & \begin{array}{l}\text { Investment } \\\text { Expenditures }\end{array} & \text { Savings } & \begin{array}{l}\text { Consumer } \\\text { Purchases }\end{array} & \text { Exports } & \begin{array}{l}\text { Consumer } \\\text { Price Index }\end{array} & \begin{array}{l}\text { Government } \\\text { Purchases }\end{array} \\\hline \$ 300 & \$ 700 & \$ 400 & \$ 2,800 & \$ 400 & 130 & \$ 800 \\\hline\end{array}\end{array}$

Which of the following is NOT a cost of inflation?

(Table 5: Price Index for Macroland) Table 5 provides the price index for Macroland for four years. What was the inflation rate in Macroland during year 4? $\begin{array}{l}\text { Table 5: Price Index for Macroland }\\\begin{array}{|c|c|c|c|c|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Price index } & 140 & 150 & 158 & 162 \\\hline\end{array}\end{array}$

(Table 6: Real GDP and Population Data) Table 6 provides data on real GDP, population, and the GDP deflator measures for four countries for 2018. What was GDP per capita in country D in 2018? $\begin{array}{l}\text { Table 6: Real GDP and Population Data, } 2018\\\begin{array}{|c|c|c|c|c|}\hline & \text { Country A } & \text { Country B } & \text { Country C } & \text { Country D } \\\hline \begin{array}{c}\text { Real GDP (millions } \\\text { of dollars) }\end{array} & \$ 4,000 & \$ 10,000 & \$ 8,000 & \$ 16,000 \\\hline \text { Population (millions) } & 4 & 5 & 2 & 4 \\\hline \text { GDP deflator } & 1.10 & 1.02 & 1.05 & 1.00 \\\hline\end{array}\end{array}$

(Table 7: GDP and Price Index Data) Table 7 provides data on GDP and price indices for Macroland for four years. What was Macroland's real GDP in 2018 using 2015 prices? $\begin{array}{l}\text { Table 7: GDP and Price Index Data }\\\begin{array}{|c|c|c|c|c|}\hline \text { Year } & 2015 & 2016 & 2017 & 2018 \\\hline \begin{array}{c}\text { Nominal GDP } \\\text { (billions of dollars) }\end{array} & \$ 800 & \$ 835 & \$ 890 & \$ 930 \\\hline \text { Price index } & 100 & 106 & 110 & 112 \\\hline\end{array}\end{array}$

What is an intermediate good?

What is the difference between nominal gross domestic product (GDP) and real GDP?

(Table 4: Market Basket Prices in Macroland) Table 4 shows the cost of a given market basket of goods and services in Macroland over a four-year period. Based on the data, during which year did deflation occur? $\begin{array}{l}\text { Table 4: Market Basket Prices in Macroland }\\\begin{array}{|l|l|l|l|l|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Cost of the market basket } & \$ 600 & \$ 640 & \$ 630 & \$ 660 \\\hline\end{array}\end{array}$

(Table 6: Real GDP and Population Data) Table 6 provides data on real GDP, population, and the GDP deflator measures for four countries for 2018. What was GDP per capita in country C in 2018? $\begin{array}{l}\text { Table 6: Real GDP and Population Data, } 2018\\\begin{array}{|c|c|c|c|c|}\hline & \text { Country A } & \text { Country B } & \text { Country C } & \text { Country D } \\\hline \begin{array}{c}\text { Real GDP (millions } \\\text { of dollars) }\end{array} & \$ 4,000 & \$ 10,000 & \$ 8,000 & \$ 16,000 \\\hline \text { Population (millions) } & 4 & 5 & 2 & 4 \\\hline \text { GDP deflator } & 1.10 & 1.02 & 1.05 & 1.00 \\\hline\end{array}\end{array}$

A chain-weighted price index is different from the consumer price index because:

When inflation occurs, the purchasing power of money:

Real GDP per capita is GDP adjusted for _____ and:

(Table 7: GDP and Price Index Data) Table 7 provides data on GDP and price indices for Macroland for four years. What was Macroland's real GDP in 2017 using 2015 prices? $\begin{array}{l}\text { Table 7: GDP and Price Index Data }\\\begin{array}{|c|c|c|c|c|}\hline \text { Year } & 2015 & 2016 & 2017 & 2018 \\\hline \begin{array}{c}\text { Nominal GDP } \\\text { (billions of dollars) }\end{array} & \$ 800 & \$ 835 & \$ 890 & \$ 930 \\\hline \text { Price index } & 100 & 106 & 110 & 112 \\\hline\end{array}\end{array}$

In the field of economics, the acronym FRED stands for:

What is the difference between inflation and the price level?

(Table 2: Data for Macroland, 2018) Table 2 provides economic data for Macroland. What is Macroland's GDP? $\begin{array}{l}\text { Table 2: Data for Macroland. } 2018 \text { (in billions of dollars) }\\\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Imports } & \begin{array}{l}\text { Investment } \\\text { Expenditures }\end{array} & \text { Savings } & \begin{array}{l}\text { Consumer } \\\text { Purchases }\end{array} & \text { Exports } & \begin{array}{l}\text { Consumer } \\\text { Price Index }\end{array} & \begin{array}{l}\text { Government } \\\text { Purchases }\end{array} \\\hline \$ 300 & \$ 700 & \$ 400 & \$ 2,800 & \$ 400 & 130 & \$ 800 \\\hline\end{array}\end{array}$

Clarify the differences between finished goods, intermediate goods, and final goods.