EC 202 EXAMS 1-3 CRAIG QUESTIONS ANSWERED CORRECTLY GRADED A+
TEST 1: 1. To answer Questions #1 through #4 use the following information: Suppose that in
the nation state of Raleighville there are 2 final goods produced in the economy-- dog food and
kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in
2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further
suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas
the price of kitten chow was $1.00 in 2000 and $2.50 in 2020.
What was the nominal GDP for Raleighville in 2000? - Answers $20.00
(1x15)+ (1x5)= 20
2. What was the real GDP for Raleighville in 2000? - Answers $20.00
Since 2000 is also the base year, Nom GDP= Real GDP
3. What was the real GDP for Raleighville in 2020? - Answers $30.00
(1x20)+(1x10)=30
4. The GDP deflator for Raleighville, for 2020, is ______________; and it follows that Raleighville
experience ____________ between 2000 and 2020. - Answers 283.33; inflation
GDP deflator: (Nom GDP/Real GDP)x 100
(85/30) x 100= 283.33
Inflation since GDP deflator went from 100 to 283
5. Suppose nominal GDP in Annaville in 2019 was $21.4. Some of the components, on the
expenditure side of the equation, were as follows: Consumption= $14.2; Investment= $3.7; Gov.
purchases of goods and services= $3.7; and Exports= $1.9, all in trillions of (nominal) Annaville
dollars. From this information, it follows that the nominal value of imports in 2019 was: -
Answers $2.1 trillion
, GDP= Consumption +Investments+ Govt. Expenditures + Exports-Imports
21.4= 14.2 + 3.7 + 3.7 + (1.9-x)
x= 2.1
6. Suppose that, as a result of an increase in the price of wheat, several large U.S. grocery
chains, increase the prices of all their bread products. It follows that, ceteris paribus, the
increase in the price will increase: - Answers both the CPI and the GDP deflator
7. In the US., for fiscal 2016, total govt. spending was roughly 38% of GDP; yet, using the
expenditure method for calculating GDP, government expenditures on goods and services were
only 18% of GDP. Which of the following most likely explains the difference? - Answers Transfer
payments are included in the first figure, but not the second one.
8. Ceteris paribus, which of the scenarios below will unambiguously lead to an increase in real
GDP? - Answers The production of final goods and services increases.
9. Currently, in the U.S. economy, the largest component on the expenditures side of the GDP
equation is typically________; whereas on the income side of the equation the largest component
is typically _____. - Answers consumption; wages and salaries
10. The real GDP of country ABC is $1,000. The population of ABC is 250. The real GDP of
country XYZ is $125. The population of XYZ is 5. Ceteris paribus, it follows that the _______ in
ABC is ________ than it is in XYZ. - Answers standard of living; is lower
Per capita real GDP= Real GDP/Population
$1000/250= $4 in ABC
$125/5= $25 in XYZ
$4 < $25
11. Suppose the CPI accurately measures inflation, and: In 1983 the CPI in Land of Oz was 100;
at the end of 2002, the CPI was 111.1. If the CPI at the end of 2003 was 113.2, then the rate of
inflation (or deflation) in 2003 was _________, and the avg. annual compounded rate of inflation
between 1983 and 2003 was _______? - Answers 1.89%; 0.62%
TEST 1: 1. To answer Questions #1 through #4 use the following information: Suppose that in
the nation state of Raleighville there are 2 final goods produced in the economy-- dog food and
kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in
2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further
suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas
the price of kitten chow was $1.00 in 2000 and $2.50 in 2020.
What was the nominal GDP for Raleighville in 2000? - Answers $20.00
(1x15)+ (1x5)= 20
2. What was the real GDP for Raleighville in 2000? - Answers $20.00
Since 2000 is also the base year, Nom GDP= Real GDP
3. What was the real GDP for Raleighville in 2020? - Answers $30.00
(1x20)+(1x10)=30
4. The GDP deflator for Raleighville, for 2020, is ______________; and it follows that Raleighville
experience ____________ between 2000 and 2020. - Answers 283.33; inflation
GDP deflator: (Nom GDP/Real GDP)x 100
(85/30) x 100= 283.33
Inflation since GDP deflator went from 100 to 283
5. Suppose nominal GDP in Annaville in 2019 was $21.4. Some of the components, on the
expenditure side of the equation, were as follows: Consumption= $14.2; Investment= $3.7; Gov.
purchases of goods and services= $3.7; and Exports= $1.9, all in trillions of (nominal) Annaville
dollars. From this information, it follows that the nominal value of imports in 2019 was: -
Answers $2.1 trillion
, GDP= Consumption +Investments+ Govt. Expenditures + Exports-Imports
21.4= 14.2 + 3.7 + 3.7 + (1.9-x)
x= 2.1
6. Suppose that, as a result of an increase in the price of wheat, several large U.S. grocery
chains, increase the prices of all their bread products. It follows that, ceteris paribus, the
increase in the price will increase: - Answers both the CPI and the GDP deflator
7. In the US., for fiscal 2016, total govt. spending was roughly 38% of GDP; yet, using the
expenditure method for calculating GDP, government expenditures on goods and services were
only 18% of GDP. Which of the following most likely explains the difference? - Answers Transfer
payments are included in the first figure, but not the second one.
8. Ceteris paribus, which of the scenarios below will unambiguously lead to an increase in real
GDP? - Answers The production of final goods and services increases.
9. Currently, in the U.S. economy, the largest component on the expenditures side of the GDP
equation is typically________; whereas on the income side of the equation the largest component
is typically _____. - Answers consumption; wages and salaries
10. The real GDP of country ABC is $1,000. The population of ABC is 250. The real GDP of
country XYZ is $125. The population of XYZ is 5. Ceteris paribus, it follows that the _______ in
ABC is ________ than it is in XYZ. - Answers standard of living; is lower
Per capita real GDP= Real GDP/Population
$1000/250= $4 in ABC
$125/5= $25 in XYZ
$4 < $25
11. Suppose the CPI accurately measures inflation, and: In 1983 the CPI in Land of Oz was 100;
at the end of 2002, the CPI was 111.1. If the CPI at the end of 2003 was 113.2, then the rate of
inflation (or deflation) in 2003 was _________, and the avg. annual compounded rate of inflation
between 1983 and 2003 was _______? - Answers 1.89%; 0.62%
