Q: Given the following data for 2023: Nominal GDP = $$66,000, Real GDP (in 2022 prices) = 62$$,000. What is the GDP deflator for 2023?

$$\frac{66,000}{62,000} \times 100\% = 106.5\%$$

Q: If nominal GDP in 2023 is $66,000 and the GDP deflator in 2023 is 106.5, what is real GDP in 2023?

$$\frac{66,000}{106.5} \times 100 = 62,000$$

Q: A country’s nominal GDP increased from $$500 billion to 600 $$billion over one year, while the GDP deflator increased from 100 to 120. What is the real GDP in the second year?

$$\frac{600}{120} \times 100 = 500$$

Question 1

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP measures the value of goods and services at current prices, while real GDP measures the value at constant prices, adjusting for inflation.

Question 2

Suppose in a two-good economy, the price of computers falls from $$1,200 to 600 $$between 2022 and 2023, while the quantity sold doubles from 5 to 10. If 2022 is the base year, what is the value of computers in real GDP for 2023?

Accepted Answer

$12,000

Question 3

Given the following data for 2023: Nominal GDP = $$66,000, Real GDP (in 2022 prices) = 62$$,000. What is the GDP deflator for 2023?

Accepted Answer

$$\frac{66,000}{62,000} 	imes 100\% = 106.5\%$$

Question 4

Why is it important to use the same base year prices when calculating real GDP growth rates between two years?

Accepted Answer

To ensure that the growth rate reflects only changes in quantities, not changes in prices.

Question 5

If real GDP per capita in Canada was 18% higher in 2023 than in 2000, and the period is 23 years, what is the formula to calculate the average annualized growth rate $$g$$?

Accepted Answer

$$g = \left( \frac{Y_{2023}}{Y_{2000}} \$$right)^{\frac{1}$${23}} - 1$$

Question 6

If nominal GDP in 2023 is $66,000 and the GDP deflator in 2023 is 106.5, what is real GDP in 2023?

Accepted Answer

$$\frac{66,000}{106.5} 	imes 100 = 62,000$$

Question 7

Which of the following statements about the GDP deflator is correct?

Accepted Answer

The GDP deflator reflects changes in the prices of all goods and services included in GDP.

Question 8

Suppose the population of Canada in 2023 is 40 million and real GDP is $2,000,000 million. What is real GDP per capita?

Accepted Answer

$$\frac{2,000,000}{40} = 50,000$$

Question 9

If the real GDP growth rate calculated using 2022 prices is 34.8%, but using 2023 prices is 29.4%, what does this imply?

Accepted Answer

The choice of base year affects the measured growth rate of real GDP.

Question 10

A country’s nominal GDP increased from $$500 billion to 600 $$billion over one year, while the GDP deflator increased from 100 to 120. What is the real GDP in the second year?

Accepted Answer

$$\frac{600}{120} 	imes 100 = 500$$

Question 11

Which of the following is a reason why macroeconomic data is often converted from nominal to real terms?

Accepted Answer

To isolate changes in quantities from changes in prices.

Question 12

If the GDP deflator in 2023 is 106.5 and in 2022 is 100, what is the inflation rate between 2022 and 2023 as measured by the GDP deflator?

Accepted Answer

$$\frac{106.5 - 100}{100} 	imes 100\% = 6.5\%$$

Question 13

In a two-good economy, if the price of bicycles increases from $$200 to 240 $$and the quantity sold increases from 200 to 250, what is the contribution of bicycles to nominal GDP in 2023?

Accepted Answer

$$250 	imes 240 = 60,000$$

Question 14

If real GDP per capita falls in a given year, which of the following could be a possible explanation?

Accepted Answer

Real GDP grew more slowly than the population.

Question 15

Suppose real GDP in 2000 was $$1,000,000 and in 2023 it is 1$$,180,000. Using the formula $$g = \left( \frac{Y_{2023}}{Y_{2000}} \$$right)^{\frac{1}$${23}} - 1$$, what is the average annualized growth rate?

Accepted Answer

$$g = (1.18$$)^{\frac{1}$${23}} - 1 \approx 0.007 = 0.7\%$$

Question 16

Which of the following best explains why the choice of base year matters when calculating real GDP growth rates?

Accepted Answer

Different base years use different prices, which can change the measured growth rate due to relative price changes.

Question 17

If nominal GDP is $80,000 and the GDP deflator is 120, what is real GDP?

Accepted Answer

$$\frac{80,000}{120} 	imes 100 = 66,666.67$$

Question 18

Which of the following is the correct formula for calculating real GDP per capita in year $$t$$?

Accepted Answer

$$	ext{Real GDP per capita in year } t = \frac{	ext{Real GDP in year } t}{	ext{Population in year } t}$$

Question 19

If the GDP deflator increases from 100 to 110 over a year, but nominal GDP remains unchanged, what happens to real GDP?

Accepted Answer

Real GDP decreases because the denominator in the calculation increases.

Question 20

A country’s nominal GDP in 2022 is $$500 billion and in 2023 is 600 $$billion. The GDP deflator in 2022 is 100 and in 2023 is 120. What is the real GDP growth rate from 2022 to 2023?

Accepted Answer

$$\frac{500 - 500}{500} 	imes 100\% = 0\%$$

Nominal vs. Real Data in Macroeconomic Measurement

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