Question

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the U.S. and $13 million in Mexico. In addition, it sold $2 million from the previous year’s inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008?
A. $12 million
B. $14 million
C. $23 million
D. $25 million
E. $27 million

9. If a country reported a nominal GDP of $400 billion in 2012 and $398 billion in 2013 and reported a GDP deflator of 100 in 2012 and 98.2 in 2013, then from 2012 to 2013 real output _______ and prices _______.
A. rose; rose.
B. rose; fell.
C. rose ; was unchanged
D. fell; rose.
E. fell; fell.

10. Suppose a country reported a nominal GDP of $550 billion in 2011 and $572 billion in 2012. It reported a GDP deflator of 115.0 in 2011 and 121.9 in 2012. From 2011 to 2012, real output _________ and prices ________.
A. rose; rose.
B. rose; fell.
C. rose ; was unchanged
D. fell; rose.
E. fell; fell.

Answer 1

Answer : (D) $25 Million

Components of GDP : Consumption, Investment , Change in Inventories , Govt. purchases , and net exports

Calculation of any Particular year's GDP is excluding of any previous year produced inventory consumption

So, Transaction contributed to sale in US and Mexico = $ 12 Million + $13 Million = $25 Million

Answer 9 : (B)

So, Nominal GDP for 2012 : $400 billion

Nominal GDP for 2013 : $398 billion

GDP Deflator for 2012 : 100

GDP Deflator for 2013 : 98.2

Real GDP for 2013 = Nominal GDP for 2013/(GDP Deflator for 2013 / GDP Deflator for 2012)

= 398/(98.2/100)

= 398/0.982

= $ 405.295 Billion

So, Real Output is $ 405.295 Billion which is higher than in 2012 and prices fell in 2013

Answer 10 : (D)

So, Nominal GDP for 2011 : $550 billion

Nominal GDP for 2012 : $572 billion

GDP Deflator for 2011 : 115

GDP Deflator for 2012 : 121.9

We take the base year GDP Deflator as 100 for calculation

Real GDP for 2012 = Nominal GDP for 2012/(GDP Deflator for 2012 / GDP Deflator for 2011)

= 572/(121.9/100)

= 572/ 1.219

= $ 469.23 Billion

Real GDP for 2011 = Nominal GDP for 2011/(GDP Deflator for 2011 / GDP Deflator for 2010)

=550/(115/100)

= 550/ 1.15

= $ 478.26 Billion

So, the Real Output has fell and prices have rose