Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134061115
Author: CASE
Publisher: PEARSON
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Chapter 6, Problem 3.8P
To determine
To evaluate the statement that the ride in prices may lead to a fall in
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Evaluate the following statement: Even if the prices of a large number of goods and services in the economy increase dramatically, the real GDP for the economy can still fall, but if the prices of a large number of goods and services in the economy decrease dramatically, the real GDP for the economy cannot rise.
Part of a bridge built by the government of Ritzland collapsed in the same year it was constructed. If the total cost of building the bridge was $4 million, and then it costs $3 million to repair it, which of the following will happen in this scenario, everything else remaining unchanged?
Ritzland's GDP will decrease by $4 million.
Ritzland's GDP will increase by $3 million.
Ritzland's GDP will increase by $7 million.
Ritzland's GDP will increase by $1 million
Research on the effects of recessions on the real level of GDP shows that
recessions cause only temporary reductions in real GDP, which are offset by growth during the expansion phase.
recessions cause large, permanent reductions in the real level of GDP.
recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary.
recessions cause both temporary and permanent declines in real GDP, but most of the decline is permanent.
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Principles of Macroeconomics (12th Edition)
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- When the Japanese car maker Toyota expands one of its car factories in the United States, What is the likely impact of this event on the gross domestic product and gross national product of the United States? a.GDP rises and GNP falls. b.GNP rises and GDP falls. c. GDP shows a larger increase than GNP d. GNP shows a larger increase than GDParrow_forwardQ1. Consider how each of the following events is likely to affect real GDP. Do you think the change in real GDP reflects a similar change in economic well-being? a. Covid pandemic forces Pakistan shopping malls to close for one month. b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests. c. Security situation in Afghanistan delays trade on Pak-Afghan border. d. Businesses and firms throughout the economy experience falling demand, causing them to lay off workers e. Government passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.arrow_forwardAssume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 million pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are produced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and consumed and its price is $0.85 per pound. (a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator. (b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation.arrow_forward
- The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meagre 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cellphones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%. Source: The Wall Street Journal, August 27, 2010 If the economy had been operating at a full employment equilibrium, (a) Describe the macroeconomic equilibrium after the rise in consumer spending. (b) Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium.arrow_forwardClassify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Banking services bought by Google Security system bought by the New York Stock Exchange Coffee beans bought by Starbucks New coffee grinders bought by Starbucks Starbucks grande mocha frappuccino bought by a student New battleship bought by the U.S. Navyarrow_forwardIn the future report of U.S. Gross Domestic Product (GDP) for Quarter 1 of 2023, which of the following would not be an example of an expenditure that would contribute to an increase in the level of GDP in Q1 of 2023? [note: focus on the direct impact of each of the choices below] Group of answer choices U.S. household spending on home appliances increases by 0.5% in 2023:Q1 Business investment spending on industrial equipment rises by 2% in 2023:Q1 U.S. Federal government interest payments rise by $120 billion in 2023:Q4 U.S. consumer spending on domestic air travel increases by 8% in 2023:Q1. None of the choices listed because all would contribute to an increase in real GDP in 2023:Q1.arrow_forward
- The difference between nominal GDP and real GDP is that nominal GDP Group of answer choices measures the level of output and real GDP measures the price level. measures the price level and real GDP measures the level of output. measures the level of output in constant prices, while real GDP includes price changes. measures the level of output including price changes, while real GDP holds prices constant.arrow_forwardA. Using the average price for all three goods, real GDP in 2012 is $___. (Enter your response as an integer.) B. Using the average prices for all three goods, real GDP in 2013 is $___. (Enter your response as an integer.) C. The percentage change in real GDP from 2012 to 2013 is __ percent. (Round your response to two decimal places.) D. Using the average prices, the GDP deflator for 2012 is ____ . (Round your response to two decimal places.) E. Using the average prices, the GDP deflator for 2013 is ____percent. (Round your response of two decimal places.) F. Using the GDP deflators recorded above the rate of inflation from 2012 to 2013 is ___ percent. (Round your response to two decimal places.)arrow_forward
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