1)You\'re computing real GDP, nominal GDP, and the GDP deflator for a country ot
ID: 1188918 • Letter: 1
Question
1)You're computing real GDP, nominal GDP, and the GDP deflator for a country other than the U.S. This country's economy is about half the size of the U.S. and the currency they use has the same value as the U.S. dollar (that is, if you travel there, the nominal price of items would be similar to what you see here). You set the base year to 2013 and the country has inflation similar to the U.S. Which of the following would be the smallest in size?
A - nominal GDP
B - real GDP
C - GDP deflator
2)
The best description of this data is FRED Consumer Price Index for All Urban Consumers: All 1tems 10.0 7.5 E 5.0 2.5 2.5 May 1950 Jul 1950 Sep 195D Nov 1950 lan 1951 Mar 1951 Source: US. Bureau or Labor Statistics Shaded areas indicate US recessions-2015 research.stlouisted.org O an expansion O a recession the price level inflation accelerating inflationExplanation / Answer
(1) If, by "Smallest" it is meant the Absolute Value of the variable, then GDP Deflator will be smallest.
That is because, GDP Deflator = Nominal GDP / Real GDP, a ratio. which cannot be a large absolute value like Real or Nominal GDP which are measured in millions or billions of dollars.
(2) This data describes Inflation.
Inflation is measured by the % change of CPI from one year to the next, which this data series represents.
Note thatw e cannot call this data as accelerating inflation because, in the beginning & end of the period, the rate of increase in CPI has decreased.
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