1. The GDP deflator is calculated for any given year by dividing nominal GDP by ______GDP and...

Question:

1. The GDP deflator is calculated for any given year by dividing nominal GDP by ______GDP and multiplying by 100.
2. If the base year is 2010, then real and nominal GDP in 2010 will be equal. ____ (True/False)
3. Measured price changes do not depend on the particular base year chosen when calculating
a. The traditional GDP deflator.
b. The chain-weighted GDP deflator.
c. Real GDP.
4. To compute nominal GDP, it is important to use an accurate price index. ______ (True/False)
5. Calculating Real GDP, Price Indices, and Inflation. Using data from the following table, answer the following questions:
a. Calculate real GDP using prices from 2011. By what percent did real GDP grow?
b. Calculate the value of the price index for GDP for 2012 using 2011 as the base year. By what percent did prices increase?

6. Using a New Base Year to Calculate Real GDP and Inflation. Repeat Exercise 4.5 but use prices from 2012.
7. Understanding the Relationship between Real and Nominal GDP in a Figure. In Figure 5.5 the base year is 2000. Explain why the line for nominal GDP lies below the line for real GDP in the years prior to 2000. If the base year was 2005, where would the two lines cross?
8. Using U.S. Economic Data to Measure the Economy. Go to the Web site for the Federal Reserve Bank of St. Louis (www.research.stlouisfed.org/fred2). Find the data for nominal GDP, real GDP in chained dollars, and the chain price index for GDP.
a. Calculate the percentage growth for nominal GDP since 2000 until the most recent year.
b. Calculate the percentage growth in real GDP since 2000 until the most recent year.
c. Finally, calculate the percentage growth in the chain price index for GDP over this same period and compare it to the difference between your answers to (a) and(b).