Question

a) What is the distinction between Nominal GDP and Real GDP? Which is more important in terms of satisfying human wants? Why?

b) Use what you need from the list below to compute GDP from the Expenditures approach.

Personal Consumption expenditures.............$475

Transfer payments.........................................$15

Consumption of fixed capital...........................$29

Interest............................................................$11

Exports............................................................$13

Government purchases...................................$80

Compensation of employees...........................$225

Imports............................................................$15

Net private domestic investment......................$42