Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 24, Problem 1CQQ
To determine
Equivalent ofConsumer Price Index.
Expert Solution & Answer
Answer to Problem 1CQQ
Option ‘c’ is the correct answer.
Explanation of Solution
Option (c)
Option (a)
Nominal GDP measures the value of the economic output at current market prices. So option ‘a’ is incorrect.
Option (b)
Real GDP measures the value of the economic output adjusted for price changes. Hence option ‘b’ is incorrect.
Option (d)
Economics Concept Introduction
Concept Introduction:
Consumer Price index (CPI): It is a measure that examines the changes in price levels of a basket of consumer goods and services for the present time from base year.
Inflation rate: Inflation rate refers to the rate of change in the price level.
GDP deflator: Gross Domestic Product (GDP) deflator is the measure of inflation.
Real GDP: Real GDP refers to the market value of all final goods and services produced in an economy during an accounting year, and measured in constant prices.
Nominal GDP: Nominal GDP refers to the market value of all final goods and services produced in an economy during an accounting year, measured in current prices.
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Click on the link to study the Economics in the News. Then answer the following questions.
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3. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that occurred in
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The graph shows the U.S. economy in the second quarter of 2016.
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Price level (GDP deflator, 2009=100)
LAS 16
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$16.7
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16.6
16.7 16.8 16.9 17.0
SAS 16
= SAS17
AD 16
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17.3
Real GDP (trillions of 2009 dollars)
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Price level (GDP deflator, 2009=100)
Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence
The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months.
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Describe the process by which the Fed's action reported in the news clip flows through the economy.
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...
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LAS
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When the Fed raises the interest rate,
A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls
B. aggregate demand increases and real GDP increases
C. aggregate demand decreases and the price level falls
D. short-run aggregate supply increases and the price level falls
The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve.
Draw the AD curve to illustrate the state of the economy…
Price level (GDP deflator, 2009=100)
Millennials Are Starting to Spend More
Millennials, who spend an average of $85 a day, are expected to spend at a higher rate in the next fifteen years.
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Source: Business Journal, May 25, 2016
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If the economy had been at a below full-employment equilibrium, then the economy will
A. move to an above full-employment equilibrium with real GDP less than potential GDP
B. move to a full-employment equilibrium as short-run aggregate supply increases at the same time
'C. move to a full-employment equilibrium and equilibrium real GDP equals potential GDP
D. remain stuck in a below full-employment equilibrium
If the economy…
Chapter 24 Solutions
Principles of Economics (MindTap Course List)
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