Chapter 7, Problem 15P

To determine

Concept Introduction:

Gross Domestic Product (GDP): It refers to the gross money value or gross market value of all the finished goods and the services produced by the normal resident and the non-residents within the borders of the country in an accounting year.

Inflation rate: The overall increase in CPI, which is the weighted average of prices of all the goods and services, is known as inflation rate.

Formula to calculate inflation rate is,

Explanation of Solution

a. Percentage change in production.

Percentage change in production of computer

Percentage change in production of Pens

Year	Price of Pens($)(A)	Quantity of Pens(B)	Total Production	Old Production(C)	Change in Production(D)	Percentage Change in Production
2014	10	100	1,000	-	-	-
2015	12	105	1,260	1,000	260	26%
2016	14	110	1,540	1,260	280	22.2%

Percentage change in production of pizzas

Year	Price of Pizza($)(A)	Quantity of Pizza(B)	Total Production	Old Production(C)	Change in Production(D)	Percentage Change in Production
2014	15	2	30	-	-	-
2015	16	2	32	30	2	6.7%
2016	17	3	51	32	19	59.3%

b. Percentage change in prices.

Percentage change in price of computer

Year	Price of Computer($)	Old Price(A)	Change in Price(B)	Percentage Change in Price
2014	900	-	-
2015	1,000	900	100	11.1%
2016	1,050	1,050	0	0%

Percentage change in price of Pens

Year	Price of Pens($)	Old Price (A)	Change in Price (B)	Percentage Change in Price
2014	10	-	-
2015	12	10	2	20%
2016	14	12	2	16.7%

Percentage change in price of Pizza

Year	Price of Pizza($)	Old Price (A)	Change in Price (B)	Percentage Change in Price
2014	15	-	-
2015	16	15	1	6.7%
2016	17	16	1	6.25%

c. Nominal GDP.

Total production of computer, Pens and pizzas is calculated in part a

Year	Total Production of Computer(A)	Total Production of Pens(B)	Total Production of Pizzas(C)	Nominal GDP
2014	9,000	1,000	30	10,030
2015	10,500	1,260	32	11,792
2016	1,2600	1,540	51	14,191

Percentage change in Nominal GDP

Year	Nominal GDP(A)	Old GDP(B)	Change in GDP	Percentage Change in Nominal GDP
2014	10,030	-	-	-
2015	11,792	10,030	1,762	17.6%
2016	14,191	11,792	2,399	20.34%

d. Real GDP.

Real GDP

Year	Total Production of Computer(A)	Total Production of Pens(B)	Total Production of Pizzas(C)	Real GDP
2014	9,000	1,000	30	10,030
2015	9,450	1,050	30	10,530
2016	10,800	1,100	45	11,945

Percentage change in real GDP

Year	Real GDP	Old GDP(A)	Change in GDP (B)	Percentage Change in Real GDP
2014	10,030	-	-	-
2015	10,530	10,030	500	5%
2016	11,945	10,530	1,415	13.43%