If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?
a. The total value of GDP must have increased 11 percent during the year.
b. The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year.
c. The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year.
d. Imports must have been about 3 percent larger than exports during the year.
B
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In the classical model, which of the following is treated as independent of the interest rate?
a. the quantity of loanable funds demanded by government b. the quantity of loanable funds demanded by businesses c. the total quantity of loanable funds demanded d. household saving e. the total quantity of loanable funds supplied
Deflation during a recession is of concern to economists because:
A. workers will demand wage increases to offset the effects of deflation. B. it is generally followed by periods of hyperinflation. C. the government is powerless to stop it. D. falling prices lead consumers to delay purchases and further reduce spending.