Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter19: The Macroeconomic Perspective
Section: Chapter Questions
Problem 28P: Last year, a small nation with abundant forests cut down 200 worth of trees. It then turned 100...
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Need help solving question 3.
Transcribed Image Text:DIRECTIONS
Each section below contains problems associated with a particular aspect of GDP. Use your knowledge
of GDP to answer each question. You may use a calculator if needed.
NOMINAL GDP AND REAL GDP
1) The following tables list GDP data for a fictional economy in two different years. Pretend this economy
only produces these three items. What is the nominal GDP each year?
Year 1 (Nominal GDP)
Year 2
(Nominal GDP)
Good
Price
Quantity
GDP
Cookies
$2
50
Good
Price
Quantity
GDP
Doughnuts
$5
35
Cookies
$3
45
Cake
$10
15
Doughnuts
$7
40
TOTAL
Cake
$1
25
TOTAL
2) Now calculate the real GDP for Year 2 using
Year 1 as the base year. This means to use the
Year 1 prices with the Year 2 quantities. Use
the table to the right to fill in your
calculations.
Year 2 (Real GDP)
Good
Price
Quantity
Real GDP
Cookies
45
Doughnuts
40
3) How much did nominal GDP for Year 2
overstate the growth in this economy? (i.e.
How much larger was Year 2 nominal GDP
than Year 2 real GDP?)
Cake
25
TOTAL
GDP PER CAPITA
4) Circle the country you would expect to have a higher GDP per capita based on its location.
a) Kenya
Germany
b) China
United States
c) Australia
Brazil
d) Argentina
Nigeria
e) India
Spain
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