Q: If nominal GDP in 2023 is $66,000 and real GDP in 2022 prices is $62,000, what is the GDP deflator for 2023?

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

Q: Suppose Canadian real GDP per capita was 18% higher in 2023 than in 2000. If the annualized average growth rate is $g$, which equation would you use to solve for $g$?

$Y_{2023} = (1 + g)^{23} \times Y_{2000}$

Q: If nominal GDP in year $t$ is $N_t$ and the GDP deflator in year $t$ is $D_t$, what is the formula for real GDP in year $t$?

$\text{Real GDP}_t = \frac{N_t}{D_t} \times 100$

Question 1

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

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is measured using constant prices from a base year.

Question 2

In a two-good economy, if the price of computers falls from $1,200 to $600 and the quantity sold doubles from 5 to 10, what happens to the nominal value of computers from 2022 to 2023?

Accepted Answer

Nominal value remains the same because the increase in quantity offsets the decrease in price.

Question 3

Given the formula for real GDP growth rate $g = \frac{Y_{2023} - Y_{2022}}{Y_{2022}} 	imes 100\%$, why is it important to use the same base year prices for both $Y_{2023}$ and $Y_{2022}$?

Accepted Answer

Using the same base year prices ensures that the growth rate reflects only changes in quantities, not prices.

Question 4

If nominal GDP in 2023 is $66,000 and real GDP in 2022 prices is $62,000, what is the GDP deflator for 2023?

Accepted Answer

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

Question 5

Why does the choice of base year affect the calculated real GDP growth rate?

Accepted Answer

Because the base year determines which prices are used, affecting the value of real GDP in each year.

Question 6

Suppose Canadian real GDP per capita was 18% higher in 2023 than in 2000. If the annualized average growth rate is $g$, which equation would you use to solve for $g$?

Accepted Answer

$Y_{2023} = (1 + g)^{23} 	imes Y_{2000}$

Question 7

Given $Y_{2023} = 1.18 	imes Y_{2000}$ and $Y_{2023} = (1 + g)^{23} 	imes Y_{2000}$, what is the formula for the annualized growth rate $g$?

Accepted Answer

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

Question 8

If nominal GDP in year $t$ is $N_t$ and the GDP deflator in year $t$ is $D_t$, what is the formula for real GDP in year $t$?

Accepted Answer

$	ext{Real GDP}_t = \frac{N_t}{D_t} 	imes 100$

Question 9

A country’s nominal GDP increases by 10% in a year, but its GDP deflator also increases by 10%. What happens to real GDP?

Accepted Answer

Real GDP remains unchanged.

Question 10

If real GDP per capita in year $t$ is $\frac{	ext{Real GDP}_t}{	ext{Population}_t}$, what does an increase in real GDP per capita indicate?

Accepted Answer

The economy is producing more goods and services per person.

Question 11

If the GDP deflator increases from 100 to 110 over a year, what does this imply about the economy?

Accepted Answer

The average price level of goods and services included in GDP has increased by 10%.

Question 12

In a scenario where real GDP per capita falls in a given year, which of the following could be a plausible explanation?

Accepted Answer

The population grew faster than real GDP.

Question 13

If the GDP deflator is used to convert nominal GDP to real GDP, which of the following statements is correct?

Accepted Answer

The GDP deflator adjusts for changes in the price level, allowing real GDP to reflect only changes in quantities.

Question 14

If a country’s real GDP per capita was $40,000 in 2000 and $47,200 in 2023, what is the percentage increase over this period?

Accepted Answer

$\frac{47,200 - 40,000}{40,000} 	imes 100\% = 18\%$

Question 15

Which of the following best explains why StatsCan publishes both nominal GDP and a GDP deflator?

Accepted Answer

To allow calculation of real GDP, which reflects changes in quantities rather than prices.

Question 16

If the GDP deflator in year $t$ is 120 and nominal GDP is $600,000$, what is real GDP in year $t$?

Accepted Answer

$\frac{600,000}{120} 	imes 100 = 500,000$

Question 17

If real GDP per capita increases but real GDP remains constant, what must have happened to the population?

Accepted Answer

The population decreased.

Question 18

Which of the following is a limitation of using real GDP as a measure of economic performance?

Accepted Answer

It does not account for changes in population size.

Question 19

If the GDP deflator is 106.5% in 2023, what does this indicate about the price level compared to the base year?

Accepted Answer

Prices have increased by 6.5% compared to the base year.

Nominal vs. Real Data in Macroeconomics: GDP Measurement and Growth

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