   Chapter 5, Problem 7PA

Chapter
Section
Textbook Problem

Consider the following data on U.S. GDP: Year Nominal GDP in billions of dollars) GDP Deflator (base year 2009) 2014 17,419 108.3 1994 7,309 73.8 a. What was the growth rate of nominal GDP between 1994 and 2014? (Hint: The growth rate of a variable X over an N-year period is calculated as 100 × [(Xfinal/Xinitial)1/N – 1].) b. What was the growth rate of the GDP deflator between 1994 and 2014? c. What was real GDP in 1994 measured in 2009 prices? d. What was real GDP in 2014 measured in 2009 prices? e. What was the growth rate of real GDP between 1994 and 2014? f. Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.

Sub part (a):

To determine

Growth rate of nominal GDP.

Explanation

The GDP will be calculated by multiplying the quantity of goods and services produced with the current year market prices which will include the inflation impact. Here, the given table represents the Nominal GDP and the GDP deflator as follows:

 Year Nominal GDP (billions) GDP Deflator (base year: 2009) 2014 $17,419 108.3 1994$  7,309 73.8

The growth rate of Nominal GDP from 1994 to 2014 can be calculated by the given equation as follows:

Growth rate of Nominal GDP1994 to 2014=100×[(Nominal Income<

Sub part (b):

To determine

Growth of GDP deflator.

Sub part (c):

To determine

Real GDP.

Sub part (d):

To determine

Real GDP.

Sub part (e):

To determine

Growth of real GDP.

Sub part (f):

To determine

The nominal and real GDP and inflation.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Give an example of each.

Foundations of Business (MindTap Course List)

What is the cause of an unfavorable volume variance?

Managerial Accounting: The Cornerstone of Business Decision-Making

List four items of information about each cash payment entered in the cash payments journal.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Give some examples that illustrate how (a) seasonal factors and (b) different growth rates might distort a comp...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List) 