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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. Year 1 is the base year. a. What is nominal GDP for each of these three years? b. What is real GDP for each of these years? c. What is the GDP deflator for each of these years? d. What is the percentage growth rate of real GDP from year 2 to year 3? e. What is the inflation rate as measured by the GDP deflator from year 2 to year 3? f. In this one-good economy, how might you have answered parts (d) and (e) without first answering parts (b) and (c)?

BuyFind

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985
BuyFind

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985

Solutions

Chapter
Section
Chapter 5, Problem 6PA
Textbook Problem

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. Year 1 is the base year.

a. What is nominal GDP for each of these three years?

b. What is real GDP for each of these years?

c. What is the GDP deflator for each of these years?

d. What is the percentage growth rate of real GDP from year 2 to year 3?

e. What is the inflation rate as measured by the GDP deflator from year 2 to year 3?

f. In this one-good economy, how might you have answered parts (d) and (e) without first answering parts (b) and (c)?

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