31. If the average price level decreased, which of the following would happen as

Question

31. If the average price level decreased, which of the following would happen as a result of this change? a. b. c. d. e. The CPI would decrease. Real GDP would decrease. Real GNP would decrease. Real PI would decrease. Nominal GDP would decrease. 32. If the PPI increases, in the future we would expect to see a. no change in the CPI b. an increase in the CPI e. a decrease in the CPI d. a decrease in COLAs. e an increase in real GDP 33. The two most important aspects of business cycles are changes in a. business profits and money supply b. unemployment and inflation. c. monopolies and the international sector. d. the price system and the foreign exchange market. e. inflation and fiscal policy Figure 7-1 Trend Tme 34. In Figure 7-1, a new contraction begins in a. year 1. b. year 2 c. year 3. d. year 4, e year 5.

Explanation / Answer

Real GDP is the real amount of goods and services produced in a country in an accounting period. It is the ratio of nominal GDP and the price level. Nominal GDP indicates value of goods and services in monetary terms while real GDP shows real amount of goods and services produced.There is an inverse relation between prices and real GDP that is increase in price level lowers the real GDP and vice-versa and positive relation in between prices and nominal GDP.

Business cycle also called as trade cycle and economic cycle. It include four phases in an economy that is recession, depression, recovery and boom. Recession and depression are the contractions or the downward phase of business cycle, Recovery and boom are the expansion and the upward phase of business cycle.

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