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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Unions are less likely to strike today than in the past because
a. real wages have increased over the last 20 years b. employers are less willing to hire strike breakers c. most workers in the U.S. are already union members d. more workers, both union and nonunion, are willing to cross picket lines e. many high-profile strikes (e.g., Caterpillar) have succeeded in winning job security
If a firm earns zero economic profit in the long run, then it
a. must be in a perfectly competitive market b. must be in a monopolistically competitive market c. cannot be in a monopolistically competitive market d. could be in any of the four major market structures e. is not in an oligopoly
GDP understates the amount of economic production in the United States because it excludes ________.
A. spending for the U.S. military B. purchases of stocks and bonds C. work performed by households for their own benefit D. transfer payments
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower