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Grade 12 · Social studies

Distinguish nominal changes from price-adjusted changes

Use a supplied price index to distinguish a change in money values from a change in price-adjusted output.

6 authored questions + worked example

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Worked example

Nominal output is 120 money units and the base-100 price index is 120. What is real output in base-year units?

Answer & why

Answer: 100 base-year units

Real output = 120 ÷ 1.20 = 100.

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All questions

All 6 authored questions for this skill.

Question 1

Nominal output is 150 and the base-100 price index is 100. What is real output?

  1. 120 base-year units
  2. 100 base-year units
  3. 200 base-year units
  4. 150 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: 150 base-year units

150 ÷ 1.00 = 150 base-year units.

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Question 2

Nominal output is 300 and the base-100 price index is 150. What is real output?

  1. 100 base-year units
  2. 150 base-year units
  3. 120 base-year units
  4. 200 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: 200 base-year units

300 ÷ 1.50 = 200 base-year units.

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Question 3

Nominal output is 100 and the base-100 price index is 125. What is real output?

  1. 80 base-year units
  2. 100 base-year units
  3. 120 base-year units
  4. 150 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: 80 base-year units

100 ÷ 1.25 = 80 base-year units.

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Question 4

A country’s total real output rises, but household distribution and other living-condition data are absent. What remains unestablished?

  1. 150 base-year units
  2. 120 base-year units
  3. individual welfare is not established
  4. 100 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: individual welfare is not established

An aggregate price-adjusted total does not describe every household’s circumstances.

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Question 5

Nominal output is 120 money units and the base-100 price index is 120. What is real output in base-year units?

  1. 200 base-year units
  2. 120 base-year units
  3. 100 base-year units
  4. 150 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: 100 base-year units

Real output = 120 ÷ 1.20 = 100.

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Question 6

Nominal output is 180 and the base-100 price index is 150. What is real output?

  1. 200 base-year units
  2. 150 base-year units
  3. 120 base-year units
  4. 100 base-year units
A hint

Nominal values use current prices; real values adjust for the price level using a stated base.

Answer & why

Answer: 120 base-year units

180 ÷ 1.50 = 120 base-year units.

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