AP Macroeconomics Question 3: Answer and Explanation
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3. Suppose a country produces only crude oil. Which of the following statements is true based on the production and price data below?
year Production (millions of barrels) Price (per barrel)
2014 300 $25.00
2015 250 $30.00
- A. Real GDP decreased nominal GDP increased.
- B. Both real and nominal GDP increased.
- C. Both real and nominal GDP decreased.
- D. Real GDP decreased and nominal GDP remained unchanged.
- E. Real GDP remained unchanged and nominal GDP increased.
Correct Answer: D
D Real GDP is a measure of a country's actual production. In this case, the production fell, so eliminate (B) and (E). Nominal GDP is the price of total production. In this case, the price for 2014 is 300 × $25 = $7,500 and the price for 2015 is 250 × $30 = $7,500. Therefore the answer is (D).