Suppose an Economy Produces Only Wheat and Rice

question 21

Multiple Choice

Suppose an economy produces only wheat and rice.Last year,20 bushels of wheat are sold at $4 per bushel,and 10 bushels of rice are sold at $2 per bushel.If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in the base year,what can we conclude?

• A) Nominal GDP is $100,real GDP is $50,and the GDP deflator is 50.
• B) Nominal GDP is $100,real GDP is $50,and the GDP deflator is 200.
• C) Nominal GDP is $50,real GDP is $100,and the GDP deflator is 200.
• D) Nominal GDP is $50,real GDP is $100,and the GDP deflator is 50.

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Definitions:

Finance

The management of large amounts of money, especially by governments or large companies, including the processes of investing, borrowing, lending, budgeting, saving, and forecasting.

Stocks and Bonds

Financial instruments that represent ownership in a company (stocks) and debt obligations (bonds), respectively, offering different levels of risk and potential returns.

Cash Flows

The aggregate sum of funds flowing in and out of a company, significantly influencing its ability to meet short-term obligations.

Expected Cash Flows

The anticipated stream of cash payments or receipts over a given period, used in evaluating investments or business projects.