# 20211003 Macro

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User Generated
Subject
Macro Economics
School
Indiana University Purdue University Indianapolis
Type
Homework
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Question
5. Suppose nominal GDP increased by 1.5%. Over that year, the GDP deflator decreased by
0.5%. From this information (and using our Aggregate Supply and Demand framework for
analysis), we infer that
A. real GDP increased, and we had an increase in Aggregate Demand.
B. real GDP increased, and we had a decrease in Aggregate Demand.
C. real GDP decreased, and we had an increase in Aggregate Supply.
D. real GDP increased, and we had an increase in Aggregate Supply.
E. real GDP decreased, and we had a decrease in Aggregate Demand.
Suppose nGDP is 100% and GDP deflator is 100% in 2018. So nominal GDP increased by 1.5%
and the GDP deflator decreased by 0.5% in 2019. the nGDP is 101.5% and GDP deflator is
99.5% in 2019. Then we can calculate the real GDP that is 102.02%.
real GDP= nominal GDP/ GDP deflator= 101.5%/99.5%=102.02%.
Aggregate demand shift from AD1 to AD2, and aggregate demand increase. An increase in
aggregate demand and no change in aggregate supply corresponds with an increase in the
price level and real GDP.The nGDP is 101.5%, indicating the price level is increase from p1 to
p2. The real GDP is 102.02% from rGDP1 to rGDP 2.
Instructions
Do #5 in Chapter 4. On this question, I want you to not only indicate your choice of 'lettered
it like a short answer question (illustrate with detailed graphs, show calculations, explain the

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Question 5. Suppose nominal GDP increased by 1.5%. Over that year, the GDP deflator decreased by 0.5%. From this information (and using our Aggregate Supply and Demand framework for analysis), we infer that A. B. C. D. E. real GDP increased, and we had an increase in Aggregate Demand. real GDP increased, and we had a decrease in Aggregate Demand. real GDP decreased, and we had an increase in Aggregate Supply. real GDP increased, and we had an increase in Aggregate Supply. real GDP decreased, and we had a decrease in Aggregate Demand. The answer is A. Suppose nGDP is 100% and GDP deflator is ...
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