Chapter 11, Problem 5MCQ

To determine

The question requires us to identify the option which can be determined by using the given table.

Explanation of Solution

Given, the nominal GDP in billions of dollars:

Country U = $19485

Country J = 4781.2

European Union = 17277.6

The given options are:

1. It is difficult to say that the Japanese were worse off than the other two nations because the nominal GDP doesn’t give any information about the population size, quality of life, distribution of income, and level of prices in the market. For example, few nations have a higher value of the “Human Development Index” and “Happiness index” even when their GDP is less than others.
So, it can’t be determined that the Japanese were worse off than the other two nations based on the nominal GDP.
2. The value of GDP per capita is based on two factors; GDP and the population. Without having information about the population size, it is difficult to say which country had a higher value of GDP per capita.
So, with the help of the information given in the table one can’t determine the level of GDP per capita in countries.
3. The value of nominal GDP represents the size of a nation. Nominal GDP gives a number that represents the level of production in an economy.
So, with the help of the information given in the table, one can determine that the country U had a larger economy than the EU.
4. It is difficult to say that the residents of the EU were better off than the other two nations because the nominal GDP doesn’t give any information about the population size, quality of life, distribution of income, and level of prices in the market. For example, few nations have a higher value of the “Human Development Index” and “Happiness index” even when their GDP is less than others.
So, one can’t determine that the residents of the EU were better off than the other two nations based on the nominal GDP.
5. It is difficult to determine the level of price just by seeing the numbers of nominal GDP. The value of nominal GDP represents the size of a nation. Nominal GDP gives a number that represents the level of production in an economy.
So, with the help of the information given in the table, one can’t determine the price level in these nations.

Therefore, option “c” is correct.

Economics Concept Introduction

Real GDP is the value of GDP calculated at the base year prices. It is the inflation-adjusted value of all final goods and services in a given year in an economy.

The nominal GDP is calculated by using the current year's prices as it doesn’t adjust for inflation.