Imagine that an economy produces two goods, flashlights and fishing lures. In 2015, the economy produced 100 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $5 and $11, respectively
In 2016, the economy produced 120 flashlights and 60 fishing lures, and the prices of flashlights and fishing lures were $7 and $14, respectively. respectively. What happened to nominal GDP from 2015 to 2016? What happened to real GDP?
Nominal GDP in 2015 was (100 × 5 ) + (50 × 11 ) = $1,050. In 2016 nominal GDP was (120 × 7 ) + (60 × 14 ) = $1,680. For real GDP, we calculate GDP for 2016 in 2015 dollars. 2016 GDP in 2015 dollars would be (120 × 5 ) + (60 × 11 ) = $1,260. So while nominal GDP increased by 60 percent, real GDP only increased by 20 percent.
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Which of the following is NOT a normative statement?
A) People buy more of a good or service when its price falls. B) The distribution of income is fair. C) The government ought to provide health care to everyone. D) Corporations should be more socially responsible.
An increase in the demand for American-made goods will
A) increase the supply of dollars on the foreign exchange market. B) decrease the supply of dollars on the foreign exchange market. C) increase the demand for dollars on the foreign exchange market. D) decrease the demand for dollars on the foreign exchange market.