Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6.
Using year 1 as the base year, compute nominal GDP, real GDP, and the GDP deflator for each year.
Year
Nominal GDP
Real GDP
GDP Deflator
(Dollars)
(Dollars)
Year 1
Year 2
Year 3
The percentage growth rate of real GDP from year 2 to year 3 is. ______%
The inflation rate as measured by the GDP deflator from year 2 to year 3 is. ______%
Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6.
Using year 1 as the base year, compute nominal GDP, real GDP, and the GDP deflator for each year.
| Year | Nominal GDP | Real GDP | GDP Deflator |
|---|---|---|---|
| (Dollars) | (Dollars) | ||
| Year 1 | |||
| Year 2 | |||
| Year 3 |
The percentage growth rate of real GDP from year 2 to year 3 is. ______%
The inflation rate as measured by the GDP deflator from year 2 to year 3 is. ______%
Related textbook solutions
Related questions
Consider a simple economy that only produces two goods; apples and oranges. The following table shows prices and quantities over a 3 year period.
|
Price of |
Quantity of |
Price of |
Quantity of |
|
|
YEAR |
Apples |
Apples |
Oranges |
Oranges |
|
2012 |
2 |
20 |
1 |
10 |
|
2013 |
3 |
24 |
2 |
12 |
|
2014 |
4 |
30 |
3 |
20 |
Use the information from the previous table to fill out the following table:
|
Real GDP |
GDP |
||
|
YEAR |
Nominal GDP ($) |
(The base year 2012)($) |
Deflator |
|
2012 |
|||
|
2013 |
|||
|
2014 |
Choose one from each:
From 2013 to 2014, nominal GDP (increased or decreased) and real GDP (increased or decreased).
The inflation rate in 2014 was (10%, 40.6%, 29.4%, -28.9%, or -9.1%).
Why is real GDP a more accurate measure of an economyâs production than nominal GDP?
1.Consider an economy in which only food, clothing, and computers are produced. The established market basket is the following: 300 food, 40 clothing, 1 computer.
|
Quantities |
Prices |
|||||
|
Food |
Clothing |
Computers |
Food |
Clothing |
Computers |
|
|
5000 |
600 |
50 |
$4 |
$20 |
$600 |
|
|
5500 |
700 |
75 |
$5 |
$22 |
$500 |
|
Year
2013
2014
Using 2014 as the base year, calculate:
a)The nominal GDP in 2013 and 2014, as well as the nominal GDP growth rate.
b)The real GDP in 2013 and 2014, as well as the real GDP growth rate.
c)The GDP deflator in 2013 and 2014, as well as the GDP deflator inflation rate.
d)Calculate the CPI in 2013 and 2014, as well as the CPI inflation rate.
