tutorial chap2

Question 1

output has two equivalent definitions. true or false? And name all equivalent definitions.

Answer 1

false. there are total three. final product and service, value added, and sum of ‘labor income, capital income, and indirect taxes’.

Question 2

nominal GDP is output valued at constant prices. true or false?

Answer 2

false. nominal GDP is output valued at current prices.

Question 3

real GDP is output valued at current prices. true or false?

Answer 3

false. real gdp is output valued at constant prices.

Question 4

what is different word for growth rate?

Answer 4

rate of change.

Question 5

unlike real gdp, nominal gdp cannot have growth rate. true or false?

Answer 5

both nominal gdp and real gdp can have their own growth rate (rate of change)

Question 6

period where it has positive real gdp is called GDP expansion. true or false?

Answer 6

false. GDP expansion and recession is based on whether GDP growth rate is positive or not, not real GDP.

Question 7

unemployed rate is ratio of unemployed to employed. true or false?

Answer 7

false. unemployed rate is ratio of unemployed to labor force (unemployed + employed)

Question 8

participation rate is ratio of employed to all-age population. true or false?

Answer 8

false. participation rate is ratio of labor force to working-age population.

Question 9

policy maker care about unemployment rate because first, employed suffer and second, it shows how unemployeed are using their resources. true or false?

Answer 9

false. they care about unemployed rate because UNemployed suffer and second to see how economy is utilizing the resource.

Question 10

lower unemployment rate is never a problem and is always good. true or false?

Answer 10

false. it can be a problem when economy develops labor shortages.

Question 11

inflation rate is — of —.

Answer 11

inflation is growth rate of aggregate price level

Question 12

GDP deflator can be other than 1 in base year. true or false?

Answer 12

false. it should be 1 based on construction.

Question 13

GDP deflator can not provide some measure of price level in the economy relative to base year. true or false?

Answer 13

false. GDP deflator can provide info on price level of given year relative to base year. because noimnal and real GDP differ only from the price. (quantity is set as same)

Question 14

GDP deflator is meaningless because —.

Answer 14

the choice of base year is arbitrary.

Question 15

the level of GDP deflator is meaningless because —.

Answer 15

the choice of base year is arbitrary.

Question 16

rate of change in GDP deflator is the only meausre for inflation. true or false.

Answer 16

false. Inflation wants to measure growth rate on GDP. For this, rate of change in GDP deflator or rate of change in CPI can be used.

Question 17

measures with — — but well-defined — — — are called index numbers.

Answer 17

arbitrary levels, rate of change

Question 18

GDP deflator is an (level / index number). choose one.

Answer 18

index number

Question 19

what are the measures for aggregate price level? Name all two.

Answer 19

GDP deflator, CPI

Question 20

inflation rate is — — of — — —.

Answer 20

inflation rate is growth rate of aggregate price level.

Question 21

What does it mean that ‘inflation can redistribute income’?

Answer 21

because some income includes nominal fixed payment. For example, retirees. (But subsidy can rise accordinngly in some countries)

Question 22

Inflation can redistribute income. true or false?

Answer 22

true.