Nominal vs Real GDP Formula Quiz

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Questions and Answers

What is the difference between nominal GDP and real GDP?

  • Nominal GDP values goods at current market prices, while real GDP values goods at constant prices. (correct)
  • Nominal GDP accounts for inflation, while real GDP ignores inflation.
  • Nominal GDP considers the value of goods produced, while real GDP considers only the quantity of goods produced.
  • Nominal GDP includes only the quantity of goods produced, while real GDP includes the value of goods produced adjusted for price changes.

In the Real-to-Nominal formula, what does the nominal value of an economic variable depend on?

  • The market demand for the variable.
  • The quantity of the variable produced.
  • The inflation rate in the economy.
  • The price level and the real value of the variable. (correct)

If the price of apples increases from $0.50 to $0.55 per pound and the quantity produced of apples increases, what will happen to the real output of apples?

  • Real output can't be determined from the information provided.
  • Real output will decrease.
  • Real output will increase. (correct)
  • Real output will remain unchanged.

In Year 2, if the price of xylophones increases from $10 to $12 and the quantity produced also increases, what impact will this have on the nominal GDP compared to the previous year?

<p>Nominal GDP will increase. (D)</p> Signup and view all the answers

How is nominal output different from real output?

<p>Nominal output considers only the quantity produced, while real output considers both quantity and market value. (A)</p> Signup and view all the answers

What economic concept is used to calculate the growth rate of a variable over time?

<p>Percentage change (A)</p> Signup and view all the answers

Which economic statistic is measured using actual market prices and is not adjusted for inflation?

<p>Nominal Value (D)</p> Signup and view all the answers

What is the process called by which capital ages and loses value?

<p>Depreciation (D)</p> Signup and view all the answers

Which of the following represents all income to businesses and individuals?

<p>National Income (A)</p> Signup and view all the answers

If an economic statistic is measured after being adjusted for inflation, it is known as?

<p>Real Value (C)</p> Signup and view all the answers

Which value is calculated by taking Gross National Product (GNP) and subtracting the value of depreciation?

<p>Net National Product (D)</p> Signup and view all the answers

If unwary analysts compared nominal GDP in different years without considering inflation, what might happen according to the text?

<p>They would underestimate national output growth. (B)</p> Signup and view all the answers

What is needed to measure changes in output by extracting the increase in prices from nominal GDP?

<p>GDP Deflator (A)</p> Signup and view all the answers

When converting nominal figures to real figures, what should be done to the published price index?

<p>Divide by 100 (A)</p> Signup and view all the answers

How is the nominal value of output calculated?

<p>Price multiplied by Quantity of Output (D)</p> Signup and view all the answers

What is a two-digit decimal number used as a price index?

<p>0.85 (B)</p> Signup and view all the answers

In a business cycle, what is the lowest point of output before a recovery begins known as?

<p>Trough (D)</p> Signup and view all the answers

Which term refers to the relatively short-term movement of the economy from recession to expansion?

<p>Business Cycle (D)</p> Signup and view all the answers

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