Economics:
Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
Question
Chapter 5, Problem 3E
To determine

(a)

    Year 1Year 2
    QuantityPriceQuantityPrice
    Oranges100$5150$5
    Pears100$375$4

The growth rate of constant-dollar real GDP with Year 1 as base.

Expert Solution
Check Mark

Answer to Problem 3E

The growth rate of constant dollar GDP is negative 3.21% with year 1 as the base price.

Explanation of Solution

    Year 1Year 2Year 1Year 2
    QuantityPriceQuantityPriceValue of goods with Year 1 as base Value of goods with Year 1 as base
    Oranges100$5150$5$500$750
    Pears100$375$4$300$225
    Total$800$775

The growth rate of GDP from Year 1to Year 2 is given by:

Growth Rate of GDP = (GDP Year 2 – GDP Year 1)GDP Year 1×100

Growth Rate of GDP = (775 – 800)800×100

Growth Rate of GDP = (25)800×100 = -3.125%

Economics Concept Introduction

Constant dollar real GDP - The nominal GDP adjusted for the inflation which reflects the value of all services and goods produced within the country in a year expressed in base year price.

To determine

(b)

    Year 1Year 2
    QuantityPriceQuantityPrice
    Oranges100$5150$5
    Pears100$375$4

The growth rate of constant-dollar real GDP with Year 2 as base.

Expert Solution
Check Mark

Answer to Problem 3E

The growth rate of constant dollar GDP with year 2 as base price is 16.67%.

Explanation of Solution

    Year 1Year 2Year 1Year 2
    QuantityPriceQuantityPriceValue of goods with Year 2 as base Value of goods with Year 2 as base
    Oranges100$5150$5$500$750
    Pears100$375$4$400$300
    Total$900$1050

The growth rate of GDP from Year 1to Year 2 is given by

Growth Rate of GDP = (GDP Year 2 – GDP Year 1)GDP Year 1×100

Growth Rate of GDP = (1050 – 900)900×100

Growth Rate of GDP = 150900×100 = 16.67%

Economics Concept Introduction

Constant dollar real GDP - The nominal GDP adjusted for the inflation which reflects the value of all goods and services produced within the country in a year expressed in base year price.

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Students have asked these similar questions
Find- A) if the base year in the year 2012 , the real gdp for 2020 equals $ ______and the real GDP for 2021 equals $______ B) The annual growth rate of real GDP in 2021 is _______ %    Please find both
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