Question

1. Nominal GDP increases from year 1 to year 2. Therefore:

a.) We produced more goods and services in year 1

b.) We produced more goods and services in year 2

c.) It is not possible to determine in which year we produced a greater quantity of goods and services

2. Net export spending will have a negative value when the country exports more goods than it imports from other countries. T/F

3. A firm produces 100 units of some goods in the year 2017 but only manages to sell 90 of the units. When we calculated GDP for the year 2017 we will count the value of the 90 units sold and ignore the value of the 10 units not sold. T/F

Answer 1

(1) (c)

Nominal GDP is the market value of all goods and services produced during a year, valued at current year prices. So nominal GDP can increase in a year if quantity is lower than previous year, but price is higher than previous year.

(2) False

Net exports = exports - Imports

When Exports > Imports, Net exports > 0.

(3) False

Value of the 90 units sold are counted as Consumption demand component of GDP, and value of the 10 unsold units are counted as Investment demand (Inventory addition) component of GDP.