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4 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2015 · Paper 2 · Question 1(b)(v)

Based on data in Table 1 showing Nominal GDP, Real Potential GDP, and GDP Deflator for 2013 and 2014 (round numerical answers to one decimal place):

Calculate the output gap (in percentage terms) in 2013 and in 2014, respectively.

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Other parts of this question

  1. 1(a)(i)Define the term 'gross domestic product (GDP)'.[2 marks]
  2. 1(a)(ii)Explain why certain final goods and services are NOT included in the measurement of GDP.[3 marks]
  3. 1(a)(iii)Explain why economists use 'real GDP' rather than 'nominal GDP' to gauge economic wellbeing.[3 marks]
  4. 1(b)(i)Calculate real GDP in 2013 and 2014, respectively.[4 marks]
  5. 1(b)(ii)Calculate the growth (in percentage terms) of nominal GDP between 2013 and 2014.[2 marks]
  6. 1(b)(iii)Calculate the growth (in percentage terms) of the real GDP between 2013 and 2014.[2 marks]
  7. 1(b)(iv)Explain the difference between 'the growth of nominal GDP' and 'the growth of real GDP'.[3 marks]
  8. 1(b)(vi)State whether the output gap was recessionary or inflationary in 2013 and 2014, respectively.[2 marks]

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