1. What does the line Nominal GDP measure?
2. What does the line Real GDP measure?
3. Why do the Real and Nominal GDP lines intersect (i.e. why are they equal) in 2012/2013?
4. Why is Real GDP higher than nominal GDP in the early part of the series but lower in the latter part?
5. For the latest available quarterly data, Nominal GDP growth is higher than real GDP growth. What does this difference mean?
6. The gap between Nominal GDP growth and real GDP growth is wider in the recent quarters than it was in the earlier years of these series. What does this reflect?
7. Consider the Nominal and Real GDP growth rates and the big swings towards the end of the series, during the COVID-19 pandemic, which began in Quarter 2 of 2020. Both series saw a drastic decline and then a recovery. The COVID-19 pandemic is what economists call a shock. Briefly discuss the effects of this shock on the various aspects of the circular flow diagram.

Impact of sharp economic decline during the COVID-19 pandemic on:

Households (Savings and Consumption (C))

Firms (Investment (I) and Production)

Government (Transfers and Taxes and Spending (G))

Rest of World (Exports (X) and Imports (M))

Impact of sharp recovery during the COVID-19 pandemic on:

Households (Savings and Consumption (C))

Firms (Investment (I) and Output)

Government (Transfers and Taxes and Spending (G))

Rest of World (Exports (X) and Imports (M))