Assume that a painter produces 20 paintings this year and 20 paintings next year. What is the annual change in nominal GPD if the price of paintings rises from $1,000 this year to $1,500 next year? Can you conclude that the economy grew from this year
to next year based on your answer? Why?
What will be an ideal response?
The nominal GDP (price times quantity) in year 1 is $20,000 and the nominal GDP in year 2 is $30,000. The change in nominal GDP from the first year to the next is $10,000, but the level of output stayed constant at 20 paintings per year. The economy grew in nominal terms because the price of paintings went up. In reality, this economy did not produce more output in the second year so we can conclude that real growth did not take place from year 1 to year 2.
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Answer the following statement true (T) or false (F)
1) Proposed ergonomics regulations are an example of industrial regulation (rather than social regulation). 2) Tying agreements are contracts by which retailers agree to charge the prices that manufacturers set on branded goods. 3) The Celler-Kefauver Act outlawed interlocking directorates. 4) The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.
An economy has two workers, Jen and Rich. Every day they work, Jen can produce 2 TVs or 10 radios, and Rich can produce 4 TVs or 12 radios. What is the opportunity cost for Jen to produce one TV?
A. 10 radios B. 1/5 radio C. 1/3 radio D. 5 radios