(Q6): Nominal and Real GDP Use the below table for this question Year 1 Year 2 P
ID: 1148395 • Letter: #
Question
(Q6): Nominal and Real GDP Use the below table for this question Year 1 Year 2 Product (Quantity) Computers Bicycles 10 250 200 Price Computers Bicycles $1 200/computer $600/computer $200/bicycle $240/bicycle (a) Calculate the nominal GDP in Year 1 and 2, what is the % increase from year 1? (b) Calculate the real GDP in Year 1 and 2 with base year 1 and base year 2. (Two separate calculations.) what is the % increase from year 1? (c) True or false; "The growth rate of real GDP depends on which year is used as the base year." Briefly explain why. (d) What is the GDP deflator for year 1 and year 2?Explanation / Answer
To Calculate Nominal GDP we need to find the total value of an output produced this year
Nominal GDP in Year1= 5*1200+200*200=6000+40000=46000
Nominal GDP in Year2= 10*600+240*250=6000+60000=66000
% increase= (N. GDP2-N.GDP1)/(N.GDP1)=(66000-46000)/46000=20/46=10/23=4.345%
To calculate Real GDP using Base Year 1
Real GDP= Nominal GDP for Year 1
Real GDP for Year 2=( Mulitplying quantity produced in year 2 and multiplied with the prices ini base year 1)
Real GDP for Year 2=(10*1200+250*200)=$62000
Similarly assunmig base year =year 2
then Real GDP for Year 1=(5*600+200*240)=$51000
REal GDP for Year 2= Nominal GDP for year 2
% increase =(62000-51000)/51000=11/51=21.8%(Little confusion about which growth rate you have asked Nominal to real??)
The GDP Deflator for year 1 if base year is 1 then Nominal GDP for Year 1= Real GDP for Year1
GDP deflator=(Nominal GDP/Real GDP)*100=1
The GDP Deflator for year 1 if base year is 2
GDP deflator=(Nominal GDP/Real GDP)*100=(46/51)*100=90%
GDP deflator for year 2 when base year is Year 1
GDP Deflator= (Nominal GDP/Real GDP)*100=(66000/62000)*100=3300/31=164%=1.64
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.