Chrome File Edit View History Bookmarks People Window Help Unit 2 Exam m/hm.tpx

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Chrome File Edit View History Bookmarks People Window Help Unit 2 Exam m/hm.tpx Below are nominal GDP and GDP deflators for four years. Profit S Nominal GDP in billions $21,000 21,560 22,495 Year GDP Deflator All 100 103 105 108 Yoar 1 Year 2 About 39 (and any su ECON 2 Profit $33: Year 4 a. Calculate real GDP in each year Instructions: Round your responses to the nearest whole number For Year 1, GDP is $ For Year 2, GDP is $ For Year 3, GDP is $ For Year 4, GDP is $ billion. billion billion. billion. People alts calculate re you've been how to find Solved: Y Problem 18 spending. 43 bo. Dd the percentage change in nominal GDP exceed the percentage change in real GDP in any of the last three years listed? Year 2: (Click to select) Year 3: (Cick to selec Year 4: (Click to solect) What is depre Given the Profit $197.C 32. Depreclati Instructions: E aggregate inco c. In which year did society's welfare increase the most? (Click to select) MacBook Pro

Explanation / Answer

A) We know that, GDP deflator = ( Nominal GDP / Real GDP)*100

So from this we can calculate Real GDP

Real GDP = (Nominal GDP / GDP deflator) *100

- For year 1,

Real GDP = ($21,000/100)*100 = $21,000

- For year 2,

Real GDP = ($21,560 /103)*100 = $20,932

- For year 3,

Real GDP = ($22,459 / 105) *100 = $21,390

- For year 4,

Real GDP = ($23,280 / 108)*100 = $21556

B) Percentage change :

Year 2 :

Percentage change in nominal GDP =

( Nominal GDP in year 2 - nominal GDP in year 1)* 100/ nominal GDP in year 1.

Percentage change in nominal GDP in year 2 =

(21,560 -21,000)*100 / 21,000 = 2.67%

Percentage change in real GDP in year 2 =

(20,932 - 21,000) * 100 / 21,000 = -0.32%

2.67 > 0.32 so in year 2 the percentage change in nominal GDP exceed the percentage change in real GDP.

- For year 3 :

% change in nominal GDP = (22495 - 21560)*100 / 21560 = 4.34%

%change in real GDP = (21390 - 20932)*100/20932 = 2.19%

In year 3 also ( 4.34 > 2.19 ) so the % change in nominal GDP is greater than % change in real GDP.

- For year 4 :

% change in nominal GDP = (23,280 - 22495)*100 /22495 = 3.49%

% change in real GDP = (21556 - 21390) *100 / 21390 = 0.77%.

In this year also %change in nominal GDP is greater than% change in real GDP.

C) The society welfare can be measure by real GDP so the year in which society welfare increase the most is the year in which the real GDP increases the most.

From part b) we can conclude that the year in which real GDP increase the most is year 3 as the % increase in real GDP is most in this year.

Ans - Year 3.

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