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Chapter 8: Q.23 (page 188)

Consider Figure 8-4. Explain what is special about the year at which the two data plots cross, and why this is so.

Short Answer

Expert verified

The nominal GDP and real GDP are equal when the two data plots cross.

Step by step solution

01

Introduction

Nominal GDP is an evaluation of monetary creation in an economy yet remembers the ongoing prices of labor and products for its estimation. GDP is normally estimated as the money-related worth of labor and products created.

02

Explanation

The nominal GDP and real GDP are equivalent in 2010 and this is special in the economy as this will happen just when the Market Prices of the Current Year are equivalent to the Market Prices of the Base Year.

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Most popular questions from this chapter

A number of economists contend that official measures of U.S. gross private investment expenditures are understated. For instance, household spending on education, such as college tuition expenditures, is counted as consumption. Some economists suggest that these expenditures, which amount to 6 percent of GDP, should be counted as investment instead. Based on this 6 percent estimate and the GDP computations detailed in Figure 8-3, how many billions of dollars would shift from consumption to investment if this suggestion was adopted?

Discuss the key components of national income.

Why might a range of dashboard economic indicators be difficult to include in one single measure such as GDP?

Consider the table below for the economy of a nation whose residents produce five final goods.

In the first stage of manufacturing each final unit of a product, a firm purchases a key input at a price of \(4 per unit. The firm then pays a wage rate of \)3 for the time that labor is exerted, combining an additional \(2 of inputs for each final unit of output produced. The firm sells every unit of the product for \)10. What is the contribution of each unit of output to GDP in the current year?
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