1. Contrast the ideas of nominal GDP also real GDP. Explain why there is one more reliable than the other for comparing changes in the standard of living over a sequence of years? Explain what the GDP cost index is and what is its role in differentiating nominal GDP and real GDP?
2. Which of the following are included or excluded in this year's GDP? In each case explain your answer.
a. An increase in leisure resulting from a 2-hour decrease in the length of the work week, along with no reduction in pay.
3. Suppose that in 1984 the total output in a single-good economy was 7000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume that in 2005 the price per bucket of chicken was $16 and that 22,000 buckets were produced. Determine the GDP price index for 1984, by means of 2005 as base year. By what percentage did the price level, as calculated by this index, increase between 1984 and 2005? What were the amounts of real GDP in 1984 and 2005?