Can you help with answer G? I believe I have the other answers correct. 5. Consi

Question

Can you help with answer G? I believe I have the other answers correct.

5. Consider a small economy that only produces two goods, matches, and hoses The prices and quantity of matches and hoses produced for the last two years can be found on the table Matches Hoses Quantity 50 40 Quantity 15 20 Price Price $10.00 $10.00 2015 $2.00 2016 $2.50 2015 - (50*2.00)-S100.00 + (15*10.00)- S150.00- S250.00 2016 - (40*2.50) S100.00 + (20*10.00) S200.00- S300.00 a. Calculate the nominal GDP in 2015 The nominal GDP in 2015 is S250.00 b. Calculate the nominal GDP in 2016 The nominal GDP in 2015 is S300.00 2015 - (50*2.00)- S100.00 + (15*10.00)- S150.00 $250.00 2016-(2.00*40) = S80+ (10.00-20-S280.00 c. Calculate the real GDP in 2015 The nominal real GDP in 2015 is $250.00 d. Calculate the real GDP in 2016 The nominal real GDP in 2016 is S280.00 e. Calculate the GDP deflator in 2015 GDP Deflator in 2015 250/250 * 100 1 f. Calculate the GDP deflator in 2016 GDP Deflator in 2016 300:250 * 100 120 g. Calculate the growth rate of real GDP between 2015 and 2016

Explanation / Answer

Growth rate of real GDP is a measure to know if there is increase or decrease in the GDP from one year to another.

GDP growth rate = [Final year's GDP - Initial year's GDP]/[Initial year's GDP] * 100

Here,

Final year's GDP(2016) =$280

Initial year's GDP(2015) =$250

Thus,

Real GDP's growth rate = [(280-250)/250]*100

= 30*100/250

=3000/250

=12%

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