Question

Study the table below and answer the following question.

YEAR	Output	Average price level	CPI	Nominal GDP	Real GDP (constant prices)	Inflation rate (%)	Economic growth
2014	700	R47.75	95.5	R33425	?	?	?
2015	840	R50	100	R42000	?	?	?
2016	900	R85	170	R76545	?	?	?
2017	980	R105	210	R102900	?	?	?
2018	980	R120	240	R117600	?	?	?
2019	1000	R150	300	R150000	?	?	?

Which one of the following has to be taken into account when GDP is estimated?

A.	John purchases shares to the value of R150 000 in Anglo American plc.
	B.	Peter invests in a 24-month tax-free fixed deposit.
	C.	A firm buys Mpho, its sales representative, a new car.
	D.	Patrick, a university student, buys an old car from a friend.
	E.	Anne, a civil pensioner, receives her monthly pension from the government.

2.

GDP at ________ prices will usually be greater than GDP at ________ prices because of ________.

	A.	constant; current; inflation
	B.	current; constant; inflation
	C.	constant; current; depreciation
	D.	current; constant; depreciation
	E.	current; constant; deflation

3.

GDP at ________ prices will usually be greater than GDP at ________ prices because of ________.

	A.	constant; current; inflation
	B.	current; constant; inflation
	C.	constant; current; depreciation
	D.	current; constant; depreciation
	E.	current; constant; deflation

A. 0.1

B.

360

C.

10

D.

10%

E.

Impossible to determine

Answer 1

(1) Which one of the following has to be taken into account when GDP is estimated -

• A is incorrect: purchasing of shares neither created any goods, nor services. Hence it does not taken into account when GDP is estimated.
• B is incorrect: investment in fixed deposits neither creates any goods, nor services. Hence it does not taken into account when GDP is estimated.
• C is correct: purchasing MPHO, & its sales representatives a new creates creates goods. Hence it is estimated in calculation of GDP.
• D is incorrect: Buying old car neither created any goods, nor services. Hence it does not taken into account when GDP is estimated.
• E is incorrect: receiving monthly pensions neither created any goods, nor services. Hence it does not taken into account when GDP is estimated.

(2) GDP at ________ prices will usually be greater than GDP at ________ prices because of ________

• A is incorrect: GDP at current price is greater than GDP at constant price.
• B is correct: GDP at current price is greater than GDP at constant price because of inflation. Because current prince gives the cost of product & services at present times which have increased due to the inflation of goods & services at any base year/constant price.
• C is incorrect: GDP at current price is greater than GDP at constant price. But reverss is not true.
• D is incorrect: GDP at current price is greater than GDP at constant price because of inflation, not Depreciation.
• E is incorrect: GDP at current price is greater than GDP at constant price because of inflation, not Deflation.

(3) GDP at ________ prices will usually be greater than GDP at ________ prices because of ________

• A is incorrect: GDP at current price is greater than GDP at constant price.
• B is correct: GDP at current price is greater than GDP at constant price because of inflation. Because current prince gives the cost of product & services at present times which have increased due to the inflation of goods & services at any base year/constant price.
• C is incorrect: GDP at current price is greater than GDP at constant price. But reverss is not true.
• D is incorrect: GDP at current price is greater than GDP at constant price because of inflation, not Depreciation.
• E is incorrect: GDP at current price is greater than GDP at constant price because of inflation, not Deflation.