Suppose GDP Consists of Wheat and Rice

question 43

Multiple Choice

Suppose GDP consists of wheat and rice.In 2011, 200 kg of wheat are sold at $4 per kg, and 100 kg of rice are sold at $2 per kg.If in 2012, the base year, the price of wheat was $1 per kg and the price of rice was $2 per kg, then for year 2011:

• A)nominal GDP is $100
• B)nominal GDP is $400
• C)nominal GDP is $4000
• D)nominal GDP is $1000

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Definitions:

Inflation

The pace of upsurge in the collective market prices for goods and services, decreasing the capacity to spend.

Interest Rates

The cost of borrowing money or the return on investment expressed as a percentage, typically on an annual basis.

CPI

Consumer Price Index, which measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

Social Security Payments

These are government payments made to qualifying individuals, such as the elderly or disabled, to help support their income.