1. FIT GDP Review

2. In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion
In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion. Calculate the GDP deflator for this economy in 1995.

3. In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion
In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion. Calculate the GDP deflator for this economy in 1995.
GDP Nominal GDP
Deflator Real GDP =
X 100

4. In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion
In 1995 the Nominal GDP = $100 billion and Real GDP = $120 billion. Calculate the GDP deflator for this economy in 1995.
GDP Nominal GDP
Deflator Real GDP =
X 100
100
120
X 100 = 83

5. The nominal income of an employee in ChuckEcheese in 1992 was $12,000
The nominal income of an employee in ChuckEcheese in 1992 was $12,000. The CPI for 1992 (the base year) was 100, and the CPI for 2003 is What would the income of the same employee be in 2003 to keep him at the same purchasing power as in 1992?

6. The nominal income of an employee in ChuckEcheese in 1992 was $12,000
The nominal income of an employee in ChuckEcheese in 1992 was $12,000. The CPI for 1992 (the base year) was 100, and the CPI for 2003 is What would the income of the same employee be in 2003 to keep him at the same purchasing power as in 1992?
Real Nominal income
income Price index =
X 100

7. The nominal income of an employee in Chuckecheese in 1992 was $12,000
The nominal income of an employee in Chuckecheese in 1992 was $12,000. The CPI for 1992 (the base year) was 100, and the CPI for 2003 is What would the income of the same employee be in 2003 to keep him at the same purchasing power as in 1992?
Real Nominal income
income Price index =
X 100
X__
1.15
X 100 = 12,000
X = $13,800

8. Suppose the following table represents the goods and services produced in a very simple economy. Assume that steel is used as an input in the production of autos. Using that information, calculate GDP.
product
Quantity
Price
Steel
1,000
$100
I pods
5,000
$300
Autos
500
$25,000
Legal services
100
$2,000

9. Suppose the following table represents the goods and services produced in a very simple economy. Assume that steel is used as an input in the production of autos. Using that information, calculate GDP.
product
Quantity
Price
Steel
1,000
$100
I pods
5,000
$300
Autos
500
$25,000
Legal services
100
$2,000
(5,000 x $300) + (500 x $25,000) + (100 x $2,000) =
14,200,000

10. Between 2007 and 2008, if an economy’s exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
The change in net exports will increase GDP by $16 billion

11. 2002
2007
Product
Quantity
Price
Movies 20 $6
Burgers
100 $2
Bikes 2
$1,000
Product
Quantity
Price
Movies 30 $7
Burgers 90
$2.5
Bikes 6
$1,100
Suppose that a very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2002 and 2007 are shown in the table above. What is nominal GDP in 2007?
(30 x $7) + (90 x $2.50) + (6 x $1,100) = $7,035

12. 2002
2007
Product
Quantity
Price
Movies 20 $6
Burgers
100 $2
Bikes 2
$1,000
Product
Quantity
Price
Movies 30 $7
Burgers 90
$2.5
Bikes 6
$1,100
What is the real GDP in 2007, using 2002 as the base year?
(30 x $6) + (90 x $2) + (6 x $1,000) = $6,360

13. In nominal GDP rises we can say that
a. Production has fallen and prices have risen
b. Production has risen and prices remain constant
c. Production has risen or prices have risen or both have risen
d. Prices have risen and production remains constant
e. We can’t say that anything has happened

14. In nominal GDP rises we can say that
a. Production has fallen and prices have risen
b. Production has risen and prices remain constant
c. Production has risen or prices have risen or both have risen
d. Prices have risen and production remains constant
e. We can’t say that anything has happened

15. You got a job in year 2000 with a salary of $25,000
You got a job in year 2000 with a salary of $25,000. In 2002, you receive a $2,000 increase in your salary. CPI in 2002 with base year 2000 is Calculate your REAL income in 2000 and Calculate the percentage change in your real income.

16. You got a job in year 2000 with a salary of $25,000
You got a job in year 2000 with a salary of $25,000. In 2002, you receive a $2,000 increase in your salary. CPI in 2002 with base year 2000 is Calculate your REAL income in 2000 and Calculate the percentage change in your real income.
Real nominal income
Income price index in hundredths =

17. You got a job in year 2000 with a salary of $25,000
You got a job in year 2000 with a salary of $25,000. In 2002, you receive a $2,000 increase in your salary. CPI in 2002 with base year 2000 is Calculate your REAL income in 2000 and Calculate the percentage change in your real income.
Real nominal income
Income price index in hundredths =
2000 Real income = $25,000
$27,000
1.08
2002 Real income =
= $25,000
Change in Real income --- 0%

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