Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must always be higher than real GDP. Do you agree or disagree? Why?
What will be an ideal response?
Disagree. It depends on whether the year being examined is before or after the base year. If after the base year, then nominal GDP will always exceed real GDP if inflation has occurred. If before the base year, then nominal GDP will always be less than real GDP if inflation has occurred. If the year being examined is before the base year and inflation has occurred, then the base year prices will exceed the prices of that year.
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Suppose a new oxygen-enrichment process will cut in half the energy required to smelt copper. The firm selling licenses for this patented process will experience a greater demand for its product when
a. the price of copper falls and smelters become more desperate to economize. b. energy prices are expected to fall. c. energy prices are expected to rise. d. the price of steel, a substitute for copper, declines.
The percentage of consumer income spent on durable goods, nondurable goods and services have changed between 1955 and 2007 as follows:
A. Percentage spent on services has declined. B. Percentage spent on durable goods has increased. C. Percentage spent on nondurable goods and durable goods has decreased. D. Percent spent on durable goods and services has increased.
Under the Tax Reform Act of 1986 the maximum rate of the corporate income tax was
A. raised. B. lowered. C. not changed.
An example of a private good is:
A. national defense. B. a bottle of perfume. C. city streets and highways. D. clean air.