The country of Sylvania produces and consumes only three goods: Red Bull, pizza, and T-shirts. The quantity produced and price of each good in 2011 and 2012 is given in the following table
a.Calculate nominal GDP for 2011 and 2012.
b.Using 2011 as the base year, calculate real GDP for 2011 and 2012.
c.Based on your answer from part (b), by what percentage did real GDP grow between 2011 and 2012?.
The country of Sylvania produces and consumes only three goods: Red Bull, pizza, and T-shirts. The quantity produced and price of each good in 2011 and 2012 is given in the following table
a.Calculate nominal GDP for 2011 and 2012.
b.Using 2011 as the base year, calculate real GDP for 2011 and 2012.
c.Based on your answer from part (b), by what percentage did real GDP grow between 2011 and 2012?.
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Real versus nominal GDP
Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.
| Year |
Apples
|
Oranges
|
||
|---|---|---|---|---|
| Price | Quantity | Price | Quantity | |
| (Dollars per apple) | (Number of apples) | (Dollars per orange) | (Number of oranges) | |
| 2010 | 1 | 120 | 1 | 195 |
| 2011 | 2 | 130 | 4 | 195 |
| 2012 | 4 | 130 | 4 | 145 |
A. Use the information from the previous table to fill in the following table.
| Year | Nominal GDP | Real GDP | GDP Deflator |
|---|---|---|---|
| (Dollars) | (Base year 2010, Dollars) | ||
| 2010 | |||
| 2011 | |||
| 2012 |
B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.
C. The inflation rate in 2012 was ____________.
D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?
a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
b. Real GDP includes the value of exports, but nominal GDP does not.
c. Real GDP is not influenced by price changes, but nominal GDP is.
Real versus nominal GDP
Consider a simple economy that produces two goods: cupcakes and erasers. The following table shows the prices and quantities of the goods over a three-year period.
|
Year |
Cupcakes |
Erasers |
||
|---|---|---|---|---|
|
Price |
Quantity |
Price |
Quantity |
|
|
(Dollars per cupcake) |
(Number of cupcakes) |
(Dollars per eraser) |
(Number of erasers) |
|
| 2010 | 2 | 125 | 3 | 155 |
| 2011 | 4 | 135 | 3 | 210 |
| 2012 | 2 | 125 | 3 | 165 |
1. Use the information from the previous table to fill in the following table.
|
Year |
Nominal GDP |
Real GDP |
|---|---|---|
|
(Dollars) |
(Base year 2010, dollars) |
|
| 2010 | ||
| 2011 | ||
| 2012 |
2. From 2011 to 2012, nominal GDP (increased/decreased) , and real GDP (increased/decreased) .
3. Why is real GDP a more accurate measure of an economy's production than nominal GDP?
a. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.
b. Real GDP is not influenced by price changes, but nominal GDP is.
c. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
