My Compromise Essay
(TCO F) Suppose nominal GDP in 2000 was $8 trillion and in 2001 it was $10 trillion. The general price index in 2000 was 100 and in 2001 it was 105. Between 2000 and 2001 real GDP rose by what percent? Show your work.
You need to make use of the inflation formula for the GDP deflator here and compare results between the two years.
100 = [$8 T / Real GDP] x 100 This is just the formula for the GDP Deflator, i.e.:
GDP Deflator = [Nominal GDP …show more content…
(2 pts.) What happens to P* if there is an increase in supply?
(4 pts.) What happens to Q* if there is a decrease in supply and a decrease in demand?
(4 pts.) What happens to P* if there is an increase in demand followed by a decrease in supply followed by another increase in demand? | | | Student Answer: | | If the quantity supplied is greater than the quantity demanded at a given price, there is a surplus. If there is no interference in the market, a surplus will disappear because the price will fall. A lower price increases the amount consumers buy and decreases the amount firms produce, both of which reduce the surplus. If the quantity demanded is greater than the quantity supplied at a given price, there is a shortage. If there is no interference in the market, the shortage will disappear because the price will rise. A higher price decreases the amount consumers buy and increases the amount firms produce, both of which reduce the shortage. A change in demand or supply will cause the equilibrium price and quantity to change as follows: Change price quantity increase in demand rise