CHAPTER 2
Quick Check
1. a. True/Uncertain. Real GDP increased by a factor of 5; nominal GDP increased by a
factor of 32. We usually think of GDP in real terms
2. a. No change. This transaction is a purchase of intermediate goods.
3. a. The value of final goods =$1,000,000, the value of the silver necklaces.
4. a. 2009 GDP: 10($2,000)+4($1,000)+1000($1)=$25,000
b. 2009 real (2009) GDP: $25,000
©2017 Pearson Education, Inc.
114
c. 2009 real (2010) GDP: 10($3,000)+4($500)+1,000($1)=$33,000
d. The answers measure real GDP growth in different units. Neither answer is incorrect,
5. a. 2009 base year:
b. 2010 base year:
c. Analogous to 4d.
6. a. 2009 real GDP = 10($2,500) + 4($750) + 1000($1) = $29,000
b. (35,500-29,000)/29,000 = .224 = 22.4%
c. Deflator in 2009=$25,000/$29,000=.86
d. Yes, see appendix for further discussion.
7. The Consumer Price Index
a. 4 x $10 + 6 x $3 = $38.00
©2017 Pearson Education, Inc.
115
g. With $100 in 2008, I can buy 2.63 baskets (you have to imagine buying only part of a
h. As the price of gas rises, economists expect that consumers would purchase less gas.
8. a. Usual output growth is positive as population grows and output per worker grows.
Dig Deeper
9. a. The quality of a routine checkup improves over time. Checkups now may include EKGs,
b. The new method represents a 10% quality increase.
c. There is a 5% true price increase. The other 10% represents a quality increase. The
d. You need to know the relative value of pregnancy checkups with and without
10. a. Measured GDP increases by $10+$12=$22. (Strictly, this involves mixing the final
b. No. The true value of your decision to work should be less than $22. If you choose to
©2017 Pearson Education, Inc.
116
Explore Further
11. a. The table below has the data
Earlier recession Crisis Recession
Date GDP growth Date GDP
growth
1999.
10.798593 2007.
10.061834
GDP growth has larger negative values in the crisis recession
b. Within the three years above, the unemployment rate peaks at 10.0% in October 2009 and
c. The unemployment rate is high even at the end of the 3-year periods above.
©2017 Pearson Education, Inc.
117