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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Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
What will be an ideal response?
The table above represents five points on the production possibility frontier for the small country of Baca, which produces only rugs (measured in thousands) and wheat (measured in thousands of bushels): Does the production possibility frontier
demonstrate the law of increasing opportunity cost? How can you tell?