Artica is a nation with a simple economy that produces only six goods: oranges,
ID: 1137162 • Letter: A
Question
Artica is a nation with a simple economy that produces only six goods: oranges, bicycles, magazines, paper, orange juice and hats. Assume that half of all the oranges are used to produce orange juice and one-third of all the paper is used to produce magazines.
a. Use the production and price information in the table fo ent calculate nominal GDP for 2011.
b. Use the production and price information in the table to calculate real GDP for 2009, 2010, and 2011 using 2009 as the base year. What is the growth rate of real GDP from 2009 to 2010 and from 2010 to 2011?
c. Use the production and price information in the table to cal- culate real GDP for 2009, 2010, and 2011 using 2010 as the base year. What is the growth rate of real GD P from 2009 to 2010 and from 2010 to 2011?
2011 2010 2009 TITY PRICE PRODUCT QUANTITY PRICE QUANTITY PRICE QUA Oranges Bicycles Magazines 17S 350 150 350150 Paper Orange 1SO $ 090 200 100200 123 20 8500 25 90.00 95.00 180 675 0.60 600 50 60 0 50 3.50 0 400 60 juice Hats 2 40 4.30 70 10.00 1250 00 15.00Explanation / Answer
Solution:a) Nominal GDP for 2011 = Price of commodity in current year X Quantity of commodity consumed in current year
[2011 Quantit Price Total Expenditure 200 30 150 630 60 100 1.25 95 3.25 0.5 4.5 15 250 2850 487.5 315 270 1500 5672.5 Oranges Bic Magazines Orange Juice Hats]
Nominal GDP for 2011 = $ 5672.5
b) Real GDP = Price of commodity in base year (2009) X Quantity of commodity consumed in current year
Real GDP for 2009 = 3719.5
Real GDP for 2010 = 4165
Real GDP for 2011 = 4843
Growth rate of GDP from 2009 to 2010 = (Real GDP in 2010 - Real GDP in 2009)/Real GDP in 2009 X 100
= (4165 - 3719.5)/3719.5 X 100 = 11.98%
Growth rate of GDP from 2010 to 2011 = (Real GDP in 2011 - Real GDP in 2010)/Real GDP in 2010 X 100
= (4843 - 4165)/4165 X 100 = 16.28%
c) Real GDP = Price of commodity in base year (2010) X Quantity of commodity consumed in current year
Real GDP for 2009 = 3965
Real GDP for 2010 = 4475
Real GDP for 2011 = 5230
Growth rate of GDP from 2009 to 2010 = (Real GDP in 2010 - Real GDP in 2009)/Real GDP in 2009 X 100
= (4475 - 3965)/3965 X 100 = 12.86%
Growth rate of GDP from 2010 to 2011 = (Real GDP in 2011 - Real GDP in 2010)/Real GDP in 2010 X 100
= (5230 - 4475)/4475 X 100 = 16.87%
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