Question

1-  

If the price of pizza is $10 this year and $15 next year, then 200 pizzas would contribute

	a.	$2,000 to this year’s nominal GDP and $3,000 to next year’s nominal GDP.
	b.	$3,000 to this year’s GDP and $2,000 to next year’s GDP.
	c.	$3,000 to this year’s nominal GDP and $3,000 to next year’s nominal GDP.
	d.	$2,000 to this year’s GDP and $2,000 to next year’s nominal GDP.

2-  

Consider the economic impact of Hurricane Florence in 2018. Which of the following statements is correct?

	a.	Damaged buildings and looting would lead to a decrease in GDP.
	b.	U.S. well-being improves the more reconstruction efforts are needed, following the decline in GDP.
	c.	Increased government spending on relief efforts in the United States would decrease GDP.
	d.	Spending toward reconstruction would lead to an increase in GDP.

Answer 1

1.Ans: a) $2,000 to this year’s nominal GDP and $3,000 to next year’s nominal GDP.

Explanation:

Nominal GDP = Current year price * Current year quantity

Nominal GDP in initial year = $10 * 200 = $2,000

Nominal GDP in next  year = $15 * 200 = $3,000

2.Ans: d) Spending toward reconstruction would lead to an increase in GDP.

Explanation:

GDP refers to the final value of goods and services which are produced within the country in a specific period of time or a given year.

GDP = C + I + G + X - M

So Spending toward reconstruction would lead to an increase in GDP.