Question

1.         Growth rate of nominal GDP – Inflation rate   =

a.         price level.

b.         the growth rate of nominal GDP.

c.         the growth rate of real GDP.

d.         the growth rate of long-run trend GDP.

e.         how much the economy contracts during a recession.

2.         The consumption category does not include purchases

a.         of new cars made by consumers.

b.         of entertainment services made by consumers.

c.         of new clothing made by consumers.

d.         of new houses made by consumers.

3.         If nominal gross domestic product (GDP) is rising and production is also rising, then it must be the case that

a.         fewer goods and services are being produced.

b.         prices must be lower on average.

c.         real GDP increases.

d.         prices are rising at a greater rate than production is rising.

e.         production is rising at a greater rate than prices are rising.

Answer 1

Q1) The answer is (c)  the growth rate of real GDP as this is the formula used for calculating the growth of real GDP.

All other options are incorrect as they do not relate to the formula given.

Q2) The answer is (d) of new houses made by consumers

houses are considered a part of the investment and not included in consumption. All other options are part of a consumer's consumption.

Q3) The answer is (c) real GDP increases

If the output increases from one year to next, real GDP will definitely increase. All other options are incorrect as they make claims which need not be true.