The economic theory that emphasizes the role of difficulties in ...

[anjilletteb]

The economic theory that emphasizes the role of difficulties in coordinating economic affairs as a cause of economic fluctuations is known as
 
  A) investment cycle theory. B) real business cycle theory.
  C) technology shock theory. D) Keynesian economics.

Question 2

Ritzland produces only one good. 10,000 units of the good were produced in Ritzland during a certain year and were sold at 42 per unit. The price of each unit of the good two years back was 37.
 
  i) Find the real and nominal GDP of Ritzland taking 37 as the base price.
  ii) Calculate the GDP deflator for Ritzland for the year in question.

[BUTTHOL369]

Answer to Question 1

D

Answer to Question 2

i) Real GDP is the total value of a country's output using base year prices. In this case, real GDP is 10,000  37 = 370,000. Nominal GDP is the total value of a country's output at current price. In this case, it is 10,000  42 = 420,000.
ii) GDP deflator is the ratio of nominal GDP to real GDP. In this case, it is