If Nominal GDP Is $8 Trillion and Real GDP Is

question 21

Multiple Choice

If nominal GDP is $8 trillion and real GDP is $10 trillion,then the GDP deflator is

• A)80,and this indicates that the price level has decreased by 20 percent since the base year.
• B)80,and this indicates that the price level has increased by 80 percent since the base year.
• C)125,and this indicates that the price level has increased by 25 percent since the base year.
• D)125,and this indicates that the price level has increased by 125 percent since the base year.

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Definitions:

Direct Labor

The cost of labor that is directly involved in the production of goods or services.

Manufacturing Overhead

Refers to the indirect factory-related costs incurred when manufacturing a product or performing a service, which may include the cost of utilities, depreciation, and salaries of maintenance personnel.

Total Manufacturing Costs

The sum of all costs directly involved in the production of a good, including direct materials, direct labor, and manufacturing overhead.

Direct Materials

The specific raw materials used in the production of goods that can be directly attributed to the finished product, contributing directly to its manufacture.