# Chapter 11 Measuring a Nation’s Production and Income

| November 9, 2018

14)
Nominal GDP measures the value of goods and services using current-year prices.

15)
Nominal GDP is measured by calculating real GDP at constant prices.

16)
The GDP deflator measures how prices change over time.

17)
Imagine that an economy produces two goods, flashlights and fishing lures. In
2011, the economy produced 100 flashlights and 50 fishing lures, and the prices
of flashlights and fishing lures were \$5 and \$11, respectively. In 2012, the
economy produced 120 flashlights and 60 fishing lures, and the prices of
flashlights and fishing lures were \$7 and \$14, respectively. respectively. What
happened to nominal GDP from 2011 to 2012? What happened to real GDP?

18)
Prior to 1996 the government measured real GDP using 1987 prices. What would
the rapid growth in computers and the fall in computer prices tend to do to the
difference between true GDP growth and measured real GDP growth, relative to
using a later year?

19)
Suppose someone told you that the chain-weighted price index for GDP in a
country was 135. Why does this fact not convey much information to you?

20)
Between 2009 and 2012, a country’s nominal GDP grew by 18% and its inflation
rate (based on the chain-weighted price index for GDP) was 11%. How fast did
real GDP grow over this period?

11.5 Fluctuations in GDP

1)
“Recession” refers to a period when real GDP in the economy
A)
declines for at least six months.
B)
suffers due to political instability.
C)
grows rapidly.
D)
experiences a rise in living standards.

2)
A period in which real GDP in the economy declines for at least six months is
referred to as
A)
long term growth.
B)
a recession.
C)
a positive fluctuation.
D)
living standards.

3)
A)
movements in stock prices.
B)
the transfer of executives between firms.
C)
used to describe fluctuations in GDP.
D)
a description of the time required to bring a new product to market.

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