Explain the difference between nominal GDP and real GDP. Which is more important when using GDP as a measure of production? Why?
What will be an ideal response?
Nominal GDP is the value of final goods and services using current-year prices. Real GDP is the value of final goods and services using base-year prices. Real GDP is more important when using GDP as a measure of production. Real GDP keeps prices constant when comparing production for different years. By keeping prices constant, changes in real GDP figures represent changes in the quantity of goods and services produced.
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If the supply curve of a product changes so that sellers are now willing to sell 2 additional units at any given price, the supply curve will
A) shift leftward by 2 units. B) shift rightward by 2 units. C) shift vertically up by 2 units. D) shift vertically down by 2 units.
Regarding short-range exchange rate movements, which of the following statements is NOT true?
a. they may vary from week to week b. they may vary from hour to hour c. are similar to those of the transaction demand determinants of long-term trends in exchange rates d. determined by arbitrage activity e. both a and b are false
Which of the following is the most accurate statement about real and nominal interest rates?
a. Real interest rates can be either positive or negative, but nominal interest rates must be positive. b. Real interest rates and nominal interest rates must be positive. c. Real interest rates must be positive, but nominal interest rates can be either positive or negative. d. Real interest rates and nominal interest rates can be either positive or negative.
Figure 10-18
Beginning in from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from
a.
E3 to E1 to E2.
b.
E1 to E3 to E2.
c.
E2 to E1 to E2.
d.
E1 to E2 to E3.