ECO 1102 Study Guide  Final Guide: Gdp Deflator, Nominal Interest Rate, Physical Capital
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1.
Given nominal GDP of $4.2 trillion and a GDP Deflator is 120, we can conclude that real GDP is equal to:
A.  $3 Trillion.  
B.  $3.5 Trillion.  
C.  $3.9 Trillion.  
D.  $5.2 Trillion. 
2.
Say real GDP is $9.2 trillion. If personal consumption is $5.1 trillion, investment is 1.8 trillion, and government purchases are 2.5 trillion, then:
A.  personal consumption is less than exports.  
B.  exports exceed imports by $0.2 trillion.  
C.  imports are equal to exports.  
D.  imports exceed exports by $0.2 trillion. 
3. If nominal output is $4.2 trillion and the GDP Deflator is 5 percent higher than its base year, then real output is:
4. If the CPI in 1979 was 72.6 and it was 82.4 in 1980, then the inflation rate from 1979 to 1980 was?
5. Housing comprises roughly 40% of the market basket in the CPI. If the price of housing rises 15% in one year while the other components in the CPI rise by 10%, the CPI will rise by 12%. True or False?
The table below lists annual consumer price index and inflation rates for a country over the period 20052010. Assume the year 2005 is used as the base year.
Year  Consumer Price Index  Inflation Rate 
2005  100  
2006  115  B 
2007  125  C 
2008  140  D 
2009  A  10% 
2010  160  E 
 
120  
 

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about
 
 
 

0.1 points
QUESTION 17
The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced
5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years.  
7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years.  
5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years.  
7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years 
0.1 points
QUESTION 18
Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
 
 
 

0.1 points
QUESTION 19
If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is
 
 
 

0.1 points
QUESTION 20
If the nominal interest rate is 7 percent and the real interest rate is 2.5 percent, then the inflation rate is
9.5 percent.  
 
 

. From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?
0.9%  
 
 

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?
 
 
 
9.1% 
. Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basketâs cost was $80; in 2014, the basketâs cost was $86; and in 2015, the basketâs cost was $90. The value of the CPI in 2015 was
104.6 and the inflation rate was 4.6%.  
 
 

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basketâs cost was $80; in 2008, the basketâs cost was $92; and in 2010, the basketâs cost was $108. The base year must be
 
2002  
2008  

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basketâs cost was $80.00; in 2013, the basketâs cost was $84; and in 2014, the basketâs cost was $87.60. The value of the CPI was
 
 
 

Which of the following is correct?
 
 
 

The inflation rate is defined as the
 
 
 

Economists use the term inflation to describe a situation in which
 
 
 

Real versus nominal GDP
Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a threeyear period.
Year 
Apples

Oranges



Price  Quantity  Price  Quantity  
(Dollars per apple)  (Number of apples)  (Dollars per orange)  (Number of oranges)  
2010  1  120  1  195 
2011  2  130  4  195 
2012  4  130  4  145 
A. Use the information from the previous table to fill in the following table.
Year  Nominal GDP  Real GDP  GDP Deflator 

(Dollars)  (Base year 2010, Dollars)  
2010  
2011  
2012 
B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.
C. The inflation rate in 2012 was ____________.
D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?
a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
b. Real GDP includes the value of exports, but nominal GDP does not.
c. Real GDP is not influenced by price changes, but nominal GDP is.