PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 5, Problem 7P
To determine
The nominal and the real
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Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2012), the production and price data were as follows:
Fruit
Quantity
Price
Apples
3,000 bags
$2 per bag
Bananas
6,000 bunches
$3 per bunch
Pineapples
4,000
$1.5 per
Oranges
8,000 bags
$4 per bag
In the current year(2013), the production and price data are follows:
Fruit
Quantity
Price
Apples
4,000 bags
$3 per bag
Bananas
14,000 bunches
$2 per bunch
Pineapples
7,500
$2 per
Oranges
32,000 bags
$5 per bag
(a) Calculate the nominal GDP in the current year and the base year. What is the percentage increase since the base year?(b) Calculate the real GDP in the current year and the base year. By what percentage does real GDP increase from the base year to the current year?(c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?(d) Would you say…
Suppose that in the nation state of Craiglandia there are 2 final goods produced in the economy – food and clothing. Suppose the economy produces 10 units of food and 5 units of clothing in 2000 (the base year), and 10 units of food and 10 units of clothing in 2015. Further suppose the price of food was $2.00 per unit in 2000, and $3.00 per unit in 2015; whereas the price of clothing was $2.00 in 2000 and $2.00 in year 2015.
What was the nominal GDP for Craiglandia in 2015?
What was the real GDP for Craiglandia in 2015?
The GDP deflator for Craiglandia, for 2015, is _______; and it follows that Craiglandia experienced _______between 2000 and 2015.
Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. In year one, the basket costs $9.00.
In year one, $72.00 will buy(0.11, 0.13, 4.5, 8, 9) baskets, and in year two, $72.00 will buy (0.11, 0.13, 4.5, 8, 9) baskets.
.
Chapter 5 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Refer to Table 6.2. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, calculate the value for this economy's GDP deflator in year 2 __________.arrow_forwardSuppose that annual output in year 1 in a 3-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are $4 per quart for ice cream, $3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s nominal GDP in year 1? Show the calculation.arrow_forwardSuppose that annual output in year 1 in a 3-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are $4 per quart for ice cream, $3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s nominal GDP in year 1? Year 1 - the output combination is - 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. Year 2, the output combination changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. The prices in both years are $4 per quart for ice cream, $3 per bottle of shampoo, and $2 per jar of peanut butter Therefore, GDP in year 1 was $21 [= (3 x $4) + (1 x $3) + (3 x $2)]. Recall that GDP is the core measure of an economy's health. Nominal GDP (also known as current–dollar economic statistics) is not adjusted to account for any price changes.…arrow_forward
- In 2019, 200 KGs of oranges are produced at Rs.40/kg, 500 KGs of apples are produced at 120/kg, and 200 Glasses of orange juice are produced at Rs.150/glass. In 2020, 220 KGs of oranges are produced at Rs.50/kg, 450 KGs of apples are produced at 140/kg, and 230 glasses of orange juice are produced at Rs.135/glass. Assuming 2019 is the base year; calculate the nominal GDP in 2019arrow_forwardnominal gdp in year 1 is 500. if gdp deflator doubles in year 8 while real output increases by 60 percent, what's nominal output in year 8arrow_forwardGDP is a total quantification of the production of goods and services of a country in a period of time, which is generally quantified annually, in fiscal year or calendar year, which includes all local and foreign companies that operate in the interior from the country. True or falsearrow_forward
- Consider the following data on Prices and Quantities of T-Shirts and Pajamas. 1. Calculate the total value of goods and services at current prices in this economy each year? 2. Calculate the total value of goods and services at constant prices in this economy each year? (Note: GDP deflator for 2015 is 100)arrow_forwardAccording to the chart, if year 1 is the base year, what would be the GDP deflator and consumer price index for year 2?arrow_forwardConsider an economy that produce only ice cream cones. In year 1, the quantity produce is 8 bars and the price is RM 2. In year 2, the quantity produced is 12 cones and the price is RM 3.50. In year 3, the quantity produced is 18 bars and the price is RM 4. Year 1 is the base year. Calculate the nominal GDP for each of these years. Calculate the real GDP for each of these years. Calculate the GDP deflator for each of these years. What is the percentage of growth rate of real GDP from year 2 to year 3?arrow_forward
- Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010, a. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5. b. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160. c. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5. d. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160.arrow_forwardDiscuss and explain the impact of each transaction below on the calculation of the gross domestic product in the current year in no more than three sentences. An Asian household receives US dollar remittance from a worker abroad in the current year.The Asian household buys new home appliance from a local supplier in the current year.The Asian household buys a newly constructed condominium unit on credit in the current year.A household member buys license for Office 365 software from Microsoft in the US through the internet using a credit card in the current year.A household receives cash through the Welfare program of the government in the current year.arrow_forwardThe gross domestic product (GDP) of the United States is defined as the _________ (options: cost of producing, market value of, wholesale cost of) all _______________ (options: final and intermediate goods and services produced, final goods and services produced, final goods and services consumed) by _________________ (options: U.S. citizens, U.S.-owned companies, resources within the United States) in a given period of time, usually a year.arrow_forward
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