Paper 1:

1. Using the following real U.S. data (base year 2012), fill in the blanks for the years 2016 through 2020.

Year	Nominal GDP	GDP Deflator	Real GDP
2016	18.968B	106.5	(solve)
2017	19.883B	(solve)	18.297B
2018	(solve)	111.2	18.721B
2019	21.694B	113	(solve)
2020	(solve)	114.4	18.768B

1. a) What was the growth rate from 2017 to 2018, 2018 to 2019, and 2019 to 2020? Show your work.

1. b) What was the inflation rate from 2017 to 2018, 2018 to 2019, and 2019 to 2020? Show your work.

2. Assume 3 companies have the financial information given below and that all costs are given.

	The BBQ Hut	The Teriyaki Hut	The Veggie Hut
Revenues	$4 million	$5 million	$40,000
Employee Compensation	$2 million	$4 million	$30,000
Rents	$500,000	$300,000	$4,000
Intermediate Good Costs	$1 million	$400,000	$15,000
Profits	$500,000	$300,000	$ - 9,000

Using the resource cost-income approach, what is the contribution of these 3 companies toward GDP? Show your work.

Paper 2: Multiple Choice.

1

Suppose the GDP deflator in an economy increases from a base year value of 100 to a value of 110 and the nominal GDP increases from $8 trillion in the base year to $9.9 trillion. What is the percent change in real GDP over this time period?

a) Percentage change = 10%

b) Percentage change = 12.5%

c) Percentage change = 23.75%

d) Percentage change = 36.125%

2

Suppose the GDP deflator in an economy increases from 100 to 110 and the nominal GDP increases from $8 trillion to $9.9 trillion. What is this economy's inflation rate?

a) inflation rate = 10%

b) inflation rate = 12.5%

c) inflation rate = 23.75%

d) inflation rate = 36.125%

3

Which of the following would be included in U.S. GDP?

a) Goods produced in the U.S. by a Japanese owned firm

b) The purchase of a used bike from a friend in the U.S.

c) A purchase of illegal drugs produced in the U.S.

d) The value of wheat used in the manufacture of cereal

4

Which of the following prices could be included in the GDP deflator but not the CPI?

a) The price of a domestically produced fighter plane

b) The price of domestically produced hamburgers

c) The price of imported French wine

d) The price of raw materials purchased by firms

5

Which of the following would add the most to this year's GDP?

a) Jones spends $200 on parts and pays her friend $1000 to come to her house and fix her car's engine

b) Jones spends $200 on parts and fixes the engine of her automobile herself

c) Jones sells her four-year-old automobile for $5,000 and buys Smith's two-year-old model for $10,000

d) Jones pays a repair shop $800 to fix the engine of her automobile

6

Suppose an economy's growth rate in real GDP is 3% and its inflation rate is 5%. Given this information, what should be the approximate percentage change in nominal GDP?

a) Percentage change = 8%

b) Percentage change = -2%

c) Percentage change = 2%

d) Percentage change = 15%

7

What is the total contribution of the following 2 firms toward GDP?

	Toaster Co.	Bread Co.
Revenue	4M	7M
Employee Compensation	2M	4M
Rental Costs	0.5M	0.8M
Intermediate Good costs	1M	1.5M
Profits	0.5M	0.7M

a) Adds 1.2 M to GDP

b) Adds 11 M to GDP

c) Adds 8.5 M to GDP

d) Adds 7.0 M to GDP

8

Suppose an economy produces the following goods at the following prices in the year 2020.

	Price	Quantity
Cars	15,000	10
Hats	100	800
Computers	2000	80

What is the nominal GDP for 2020?

a) NGDP = 2,810

b) NGDP = 5,060

c) NGDP = 15,180

d) NGDP = 390,000

9

Because of transactions which take place in the underground economy, the

a) value of the GDP calculation through the expenditure approach will be greater than the value calculated through the resource cost approach

b) GDP calculation tends to understate the actual value of goods sold in the economy

c) GDP calculation tends to overstate the actual value of goods sold in the economy

d) GDP calculation tends to accurately portray the value of goods sold in the economy

10

Suppose the GDP Deflator in the year 1990 is 100 and the GDP Deflator in the year 2000 is 120. Assuming the base year is 1990, nominal GDP in the year 1990 is $10 trillion and nominal GDP in the year 2000 is $15 trillion, what is the real GDP in the year 2000?

a) RGDP = 12.5 trillion

b) RGDP = 18 trillion

c) RGDP = 12 trillion

d) RGDP = 10 trillion