AP Macroeconomics Question 3: Answer and Explanation

Test Information

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Question: 3

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

Explanation:

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).