L02 Concept_Test

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South Piedmont Community College *

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102

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Economics

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Feb 20, 2024

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docx

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Lesson 2 ConcepTest 1. You are given the following data about 4 different goods produced in a country; orange juice, oranges (half of which are used in the production of orange juice and half of which are consumed by families), pens, and scissors. The prices and quantities produced are given over a 2-year period. 2013 2014 Price Quantity Price Quantity Orange Juice $8.00 20 $9.00 23 Oranges $5.00 14 $5.00 16 Pens $2.00 30 $2.25 35 Scissors $5.00 12 $5.50 11 a. Please calculate the following using 2013 as the base year. You must show all your work for full credit. Round to two decimal places. 2013 2014 $8.00 X 20 = $160 $9.00 X 23 = $207 $5.00 X 14 = $70 $5.00 X 16 = $80 $2.00 X 30 = $60 $2.25 X 35 = $78.75 $5.00 X 12 = $60 $5.50 X 11 = $60.50 Total Nominal/Real GDP = $350 Total Nominal GDP = $426.25 Note: Since 2013 is the base year the $8.00 X 23 = $184 Nominal GDP and Real GDP are going to be the same. $5.00 X 16= $80 $2.00 X 35 = $70 $5.00 X 12 = $55 Total Real GDP = $389 Nominal GDP in 2013 = $350 Real GDP in 2014 = $389
b. Given the data above and using the GDP Deflator as a price level, what is the inflation rate in the year 2014? You must show all your work for full credit. Round to two decimal places. NDGP 2013 = $350 RGDP 2013 with a base year of 2013 = $350 NGDP 2014 = $426.25 RGDP 2014 with a base year of 2013 = $389 (426.25 / 389) X 100 = 1.09575835 X 100 = 109.58 2. Please name two reasons why GDP is not a perfect measure of production in an economy. One reason why GDP is not a perfect measure of production is because it does not include non-market transactions. Therefore, anything sold or traded in the shadow economies are not counted towards the overall GDP of a country. Furthermore, GDP does not consider household production. The example provided in the reading on Canvas referenced the value produced by a stay-at-home parent.
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