Homework: Macroeconomic Measurements, Part II: GDP and Real GDP (Ch 07) Consider
ID: 1134826 • Letter: H
Question
Homework: Macroeconomic Measurements, Part II: GDP and Real GDP (Ch 07) Consider a simple economy that produces two goods: cupcakes and envelopes. The following table shows the prices and quantities of the goods over a three-year period Cupcakes Envelopes Price Quantity (Number of cupcakes) 115 150 100 Price (Dollars per envelope) Quantity (Number of envelopes) 175 180 160 (Dollars per cupcake) Year 2008 2009 2010 Use the information from the previous table to fill in the following table. GDP Real GDP (Dollars) (Base year 2008, dollars) Year 2008 2009 2010 From 2009 to 2010, GDP and real GDP Why is real GDP a more accurate measure of an economy's production than GDP? O Real GDP does not include the value of intermediate goods and services, but GDP does O Real GDP is not influenced by price changes, but GDP is. Real GDP measures the value of the goods and services an economy produces, but GDP measures the value of the goods and services an economy consumes.Explanation / Answer
GDP: Current year price x Current year quantity
2008 = 2 x 115 + 5 x 175 = 230 + 875 = 1105
2009 = 4 x 150 + 2 x 180 = 600 + 360 = 960
2010 = 1 x 100 + 2 x 160 = 100 + 320 = 420
Real GDP: Base year price x Current year quantity
2008 = 2 x 115 + 5 x 175 = 230 + 875 = 1105
2009 = 2 x 150 + 5 x 180 = 300 + 900 = 1200
2010 = 2 x 100 + 5 x 160 = 200 + 800 = 1000
From 2009 to 2010, GDP Decreases and real GDP decreases.
Real GDP is not influenced by price changes, but GDP is.
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