Page 159 - Krugmans Economics for AP Text Book_Neat

What was the value of real GDP in each year? 5. Refer to the 2009 data in the table below.
Year 1 Year 2
a. $1,400 $2,700 Nominal GDP in billions of dollars
b. 1,900 2,700
United States $14,259
c. 1,400 2,000
d. 1,900 2,000 Japan 5,049
e. 1,400 1,900 European Union 16,191
4. Real GDP per capita is an imperfect measure of the quality of
life in part because it Which of the following must be true? Section 3 Measurement of Economic Performance
a. includes the value of leisure time. I. Residents of Japan were worse off than residents of the
b. excludes expenditures on education. United States or the European Union.
c. includes expenditures on natural disasters. II. The European Union had a higher nominal GDP per
d. excludes expenditures on entertainment. capita than the United States.
e. includes the value of housework. III. The European Union had a larger economy than the
United States.
a. I only
b. II only
c. III only
d. II and III
e. I, II, and III

Tackle the Test: Free-Response Questions

1. The economy of Britannica produces three goods: computers, 2. Use the information in the table below to answer the following
DVDs, and pizza. The accompanying table shows the prices and questions.
output of the three goods for the years 2008, 2009, and 2010. a. Calculate the percent increase in nominal GDP between
2005 and 2010 for each country.
Computers DVDs Pizza b. What happened to the price level in each country between
Year Price Quantity Price Quantity Price Quantity 2005 and 2010?
c. Calculate real GDP in each country in 2010, using 2005 as
2008 $900 10 $10 100 $15 2
the base year.
2009 1,000 10.5 12 105 16 2
d. Calculate the percent increase in real GDP between 2005 and
2010 1,050 12 14 110 17 3 2010 for each country.
e. Compare the two countries’ real GDP per capita in 2010
using 2005 as the base year.
a. What is the percent change in computer production from
2008 to 2009?
b. What is the percent change in the price of pizza from 2009 Year Nominal GDP Price Level Population
to 2010? Country A
c. Calculate nominal GDP in Britannica for 2008.
2005 $2,000 $100 10
d. Calculate real GDP in Britannica for 2008 using 2008 as the
2010 4,000 100 20
base year.
Country B
e. Calculate real GDP in Britannica for 2010 using 2008 as the
base year. 2005 $2,000 $100 10
2010 6,000 200 15
Answer (5 points)
1 point: 0.5/10 × 100 = 5%
1 point: $1/$16 × 100 = 6.25%
1 point: ($900 × 10) + ($10 × 100) + ($15 × 2) = $9,000 + $1,000 + $30 = $10,030
1 point: Real GDP equals nominal GDP in the base year, so this answer is the
same as in part c.
1 point: ($900 × 12) + ($10 × 110) + ($15 × 3) = $10,800 + $1,100 + $45 =
$11,945

module 11 Interpreting Real Gross Domestic Product 117