Question

_________GDP is the total value of production? (final goods and? services) using current prices. Consider an...

_________GDP is the total value of production? (final goods and? services) using current prices.

Consider an illustrative economy that produces luxury pens. Assume that in 2012 this economy produced 30

luxury pens at a market price of $300 per pen. In 2013?, the number of luxury pens produced remains the same but the market price has increased to

?$400 per pen. If 2012 is the base? year, the real GDP in 2013 is $________

The nominal GDP in 2013 has

?

decreased or

increased

by_________% percent from what it was the year before.

?(Round

your answer to two decimal

places?.)

Which of the following statements are true regarding the quantity theory of? money?

?(Check

all that

apply.?)

A.

Growth rate of money

supplyequals=Growth

rate of nominal

GDPminus?Inflation

rate.

B.

Growth rate of money

supplyequals=Growth

rate of real GDP.

C.

Growth rate of money

supplyequals=Growth

rate of nominal GDP.

D.

Growth rate of money

supplyequals=Inflation

rateplus+Growth

rate of real GDP

Homework Answers

Answer #1

In 2012,

Nominal GDP = 30 * $300 = $9,000

In 2013,

Nominal GDP = 30 * $400 = $12,000

Real GDP = 30 * $300 = $9,000

The real GDP in 2013 is $9,000.

Percentage change in nominal GDP = [(Nominal GDP in 2013 - Nominal GDP in 2012)/Nominal GDP in 2012] * 100

Percentage change in nominal GDP = [($12,000 - $9,000)/$9,000)] * 100 = 33.33%

Thus,

The nominal GDP in 2013 has increased by 33.33% from what it was the year before.

Following equations represents quantity theiry of money -

1. Growth rate of money suplpy = Inflation + growth rate of real GDP

2. Growth rate of money supply = Growth rate of nominal GDP

Hence, the correct answer is the option (C) and (D).

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