Question

1. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:

a. $5 b. $6.50 c. $9.50 d. $11.

2. If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ____percent.

a. 2 b. 3 c. 5 d. 8

3. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are –$1,910, then government purchases is

a. $2,977 b. $1,910 c. –$843 d. $1,067

4. 10. GNP equals GDP___ income earned domestically by foreigners ____ income that nationals earn abroad.

a. plus; plus b. minus; minus c. minus; plus d. plus; minus

5. Prices of items included in the CPI are:

a. averaged with the price of every item weighted equally.

b. weighted according to amount of the item produced in GDP.

c. weighted according to quantity of the item purchased by the typical household.

d. chained to the base year by the year-to-year growth rate of the item

6. An increase in the price of goods bought by firms and the government will show up in:

a. the CPI but not in the GDP deflator.

b. the GDP deflator but not in the CPI.

c. both the CPI and the GDP deflator.

d. neither the CPI nor the GDP deflator.

Answer 1

Ans 1)

Real GDP in 2002 Prices= Quantity of oranges in 2009* price of oranges in 2002+Quantity of apples in 2009* price of apples in 2002=4*1+5*0.5=$6.5

Hence option B is correct

Ans 2)

GDP deflator=Nominal GDP/Real GDP

GDP deflator (New)=Nominal GDP(1.05)/Real GDP(1.03)=GDP deflator (old)*1.019

Hence GDP deflator grew by 1.9% i.e 2%

option A is correct

Ans 3)

GDP=Consumption +Investment +Government Purchases+Export-Import

5465=3657+741+G-1910

7375=4398+G

G=$2977

Hence option A is correct

Ans 4)

GNP= GDP+ income earned domestically by foreigners+income that nationals earn abroad

hence option A is correct

Ans 5)

Option B is correct answer

Ans 6)

Option B is correct