Feedback: See the definition of nominal GDP in the textbook.
[QUESTION]
116. The difference between nominal GDP and real GDP is that:
A. real GDP adjusts the value of goods for changes in the price level and nominal GDP does
not.
B. nominal GDP adjusts the value of goods for changes in the price level and real GDP does not.
C. real GDP accounts for foreign production in the a country and nominal GDP does not.
D. nominal GDP accounts for foreign production in the a country and real GDP does not.
117. An increase in nominal GDP implies an increase in:
A. the price level.
B. output.
C. both the price level and output.
D. either the price level or output or both.
118. If there are only two goods in the economy, one whose price rises by 3% and one by 5%, it
is possible that inflation is:
A. 3%
B. 4%
C. 5%.
D. 7%
119. If there are only two goods in the economy, one whose price rises by 1% and one by 6%, it
is possible that inflation is:
A. 1%
B. 2%
C. 6%.
D. 7%
120. If there are only two goods in the economy, one whose price rises by 8% and one by 10%,
it is possible that inflation is:
A. 2%
B. 8%
C. 10%.
D. 9%
121. Real GDP is calculated by:
A. multiplying nominal GDP by the appropriate price index times 100.
B. multiplying nominal GDP by the inflation rate times 100.
C. dividing nominal GDP by the appropriate price index times 100.
D. dividing nominal GDP by the inflation rate times 100.
122. Suppose that both nominal GDP and prices double. We can conclude that real output:
A. more than doubled.
B. doubled.
C. remained constant.
D. fell.
123. Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information,
what is real GDP?
A. $9.8 trillion
B. $11.4 trillion
C. $13.8 trillion
D. $15.2 trillion
124. If nominal GDP is $14 trillion and real GDP is $12 trillion, the GDP deflator is:
A. 86.
B. 117
C. 112
D. 114
117.
125. If nominal GDP is $10 trillion and real GDP is $11 trillion, the GDP deflator is:
A. 91.
B. 100
C. 111
D. 121
126. If nominal GDP is $15 trillion and real GDP is $12 trillion, the GDP deflator is:
A. 75.
B. 120.
C. 125
D. 150
127. If real income rises from $5 trillion to $5.3 trillion while the price level increases by 10%,
it follows that nominal income:
A. doesn’t change.
B. rises by 6%.
C. rises by 10%.
D. rises by 16%.
128. If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3
billion to $4 billion, it follows that:
A. the price level and real output increased at the same rate.
B. real output rose and price level fell.
C. the price level increased at a faster rate than real output.
D. the price level rose by 25%.
129. Suppose both nominal GDP and real GDP increase. It can be concluded that:
A. output rose.
B. the price level rose.
C. both output and the price level rose.
D. both output and the price level rose, but output rose at a faster rate.
130. The relationship between real GDP and nominal GDP can be expressed by:
A. real GDP = nominal GDP + inflation.
B. percent change in real GDP = percent change in nominal GDP – inflation.
C. real GDP = nominal GDP – inflation.
D. Real GDP = nominal GDP + inflation.
131. If the percent change in nominal GDP is 5% and inflation is 3%, the percent change in real
GDP is:
A. 0%.
B. 2%
C. 8%.
D. 15%.
132. If the percent change in nominal GDP is 3% and inflation is 4%, the percent change in real
GDP is:
A. -1%.
B. 0%
C. 1%.
D. 2%.
133. If the percent change in nominal GDP is 6% and the percent change in real GDP is 2%,
inflation is:
A. 0%.
B. 2%
C. 4%.
D. 6%.
134. If the percent change in real GDP is 5% and inflation rate is 1%, what is the percent change
in nominal GDP?
A. 0%.
B. 2%
C. 4%.
D. 6%.
135. If real GDP has increased by 3% and nominal GDP has increased by 5%, then:
A. depreciation is 2%.
B. net factor income is 2%.
C. inflation is 2%.
D. net exports are 2%.
136. If nominal GDP increases by 2% and the price level drops by 1%, real GDP:
A. increases by 1%.
B. decreases by 1%.
C. increases by 3%.
D. decreases by 3%.
137. Real GDP would increase by 3% if nominal GDP increased by:
138. The price index that measures the average rate of change in the prices received by domestic
producers of goods and services is called the:
A. PCE deflator.
B. CPI.
C. GDP deflator.
D. PPI.
139. Which of the following provides the closest measure of the rate of change in the prices paid
by households?
A. PCE deflator
B. BLS deflator
C. GDP deflator
D. PPI
140. Assuming food and beverages make up about 15% of total expenditures and food and
beverage prices rise by 10% while the other components of the price index remain constant,
approximately by how much will the price index rise?
A. 1%.
B. 1.5%.
C. 15%.
D. 25%.
141. If the price of housing (which accounts for 40% of total expenditures in the CPI basket),
rises by 5% in one year while the prices of all other goods remain constant, by how much will
the CPI rise?
A. 2%
B. 5%
C. 10%
D. 40%
142. If the price of clothing (which accounts for 5% of total expenditures in the CPI basket),
rises by 10% in one year while the prices of all other goods remain constant, by how much will
the CPI rise?
A. 0.5%
B. 5%
C. 10%
D. 50%
143. If the price of housing (which accounts for 40% of total expenditures in the CPI basket),
rises by 10% in one year while the prices of all other goods rises by 27%, by how much will the
CPI rise?
A. 10%
B. 20%
C. 234%
D. 27%
144. If the CPI in year 2 equals 110 and the CPI in year 3 equals 121, it can be concluded that
consumer prices:
A. rose from year 2 to year 3 by 11%.
B. rose from year 2 to year 3 by 21%.
C. rose from year 2 to year 3 by 10%.
D. are the same in year 2 as in the base year.
145. If the United States CPI was 37 in 1973 and in 2016 it was 215.3. By what percent did
prices increase in the United States between 1973 and 2016? (Not the annual rate of change, but
total.)
A. 5
B. 48
C. 482
D. 545
146. One reason economists have begun focusing on the Personal Consumption Expenditure
measure for inflation is that the PCE deflator:
A. takes the exchange rate value of the dollar into account.
B. weights food more because food is a rising percent of expenditures.
C. allows for a changing basket of goods.
D. includes the price of assets such as stock portfolios.
147. If the PCE deflator increased from 88 to 99 in one year, the rate of consumer inflation is:
A. 10.0%.
B. 11.0%.
C. 12.5%.
D. 13.4%.
148. The relationship between real and nominal interest rates can be expressed by:
A. real interest rate = nominal interest rate + inflation.
B. real interest rate = inflation – nominal interest rate .
C. real interest rate = nominal interest rate – inflation.
D. The real interest rate cannot be calculated.
149. If the nominal interest rate is 5% and inflation is 3%, the real interest rate is:
A. 0%.
B. 2%
C. 8%.
D. 15%.
150. If the nominal interest rate is 2% and inflation is 3%, the real interest rate is:
A. -1%.
B. 0%
C. 1%.
D. 2%.