EC 202 Exams 1-3 Craig
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? - Answer-$20.00
(1x15)+ (1x5)= 20
2. What was the real GDP for Raleighville in 2000? - Answer-$20.00
Since 2000 is also the base year, Nom GDP= Real GDP
3. What was the real GDP for Raleighville in 2020? - Answer-$30.00
(1x20)+(1x10)=30
4. The GDP deflator for Raleighville, for 2020, is ______________; and it follows that Raleighville
experience ____________ between 2000 and 2020. - Answer-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: - Answer-$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: - Answer-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? - Answer-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? -
Answer-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
_____. - Answer-consumption; wages and salaries
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? - Answer-$20.00
(1x15)+ (1x5)= 20
2. What was the real GDP for Raleighville in 2000? - Answer-$20.00
Since 2000 is also the base year, Nom GDP= Real GDP
3. What was the real GDP for Raleighville in 2020? - Answer-$30.00
(1x20)+(1x10)=30
4. The GDP deflator for Raleighville, for 2020, is ______________; and it follows that Raleighville
experience ____________ between 2000 and 2020. - Answer-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: - Answer-$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: - Answer-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? - Answer-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? -
Answer-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
_____. - Answer-consumption; wages and salaries
