1. The U.S. has produced the following quantity of gauges and potatoes, with the price of each listed in dollar terms.
(a) Using Year 1 as the base year, what is the growth rate of real GDP from Year 1 to Year 2?
(b) Based on the GDP deflator, what is the inflation rate from Year 1 to Year 2?
2. Based on data in Table 1, compute
(a) Personal consumption expenditure
(b) Gross Private investment
(c) Government purchases
(d) Net export of goods and services
(e) GDP
Table 1
Category of Expenditure Trillions of $
Durable Goods 1.1
Fixed Investment 1.0
Federal Government Purchases 0.9
Exports 1.3
Nondurable Goods 2.6
Nonresidential Structures 1.3
State and Local Government 1.5
Imports 2.0
Services 5.2
Residential Structures 0.8
Changes in Business Inventories 2
3. For the purposes of assessing an economy's growth performance, which is the more important statistic, real GDP or nominal GDP? Why?