MACROECONOMICS - MYECONLAB >IA<
7th Edition
ISBN: 9780135852866
Author: Hubbard
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 8.7RDE
Subpart (a):
To determine
Nominal GDP and price deflator.
Subpart (b):
To determine
The real GDP.
Subpart (c):
To determine
The real growth rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Gorgonzola is a small island nation with a simple economy that produces only six goods: sugar cane, yo-yos, rum, peanuts, harmonicas, and peanut butter. Assume that half of all sugar cane is used to produce rum, and one-fifth of all the peanuts are used to produce peanut butter. Use the production and price information in the table to calculate real GDP for 2013, 2014, and 2015 using 2014 as the base year. What is the growth rate of real GDP from 2013 to 2014 and from 2014 to 2015?
Suppose an economy that produces and consumes apples, bread, and toy-cars. In the
following table are data for two different years.
2019 2020
Good Quantity Price Quantity Price
Apples 50 Rs.50 60 Rs.60
Bread 200 Rs. 20 180 Rs.25
Cars 25 Rs. 100 30 Rs.140
a. Using 2019 as the base year, compute the following statistics for 2019 and 2020 in the table
given below:
Statistics 2018 2019
GROSS DOMESTIC PRODUCT
Nominal GDP
Real GDP
GROWTH RATE
Growth Rate of Nominal GDP
Growth Rate of Real GDP
PRICE INDICES
GDP deflator
Inflation rate using GDP deflator -
CPI (a fixed-weight price index)
Inflation rate using CPI
b. How much did the cost of living rise between 2018 and 2019? Compare the answers given by
GDP deflator and CPI. Explain the difference.
c. Explain which price index (GDP deflator or CPI) should be used to adjust the salaries,
budget or spending to counterbalance the changes in the cost of living? Why?
Why the use real GDP is preferred by economists over nominal GDP to gauge economic well-being?
Consider the following data on the Pakistan economy:
Nominal GDP GDP Deflator
Year (in billions of rupees) (base year 2012)
2018 21,501 111.4
1998 9,163 76.3
a) What was the growth rate of nominal GDP between 1998 and 2018? (Hint: The growth rate of a variable X over an N-year period is calculated as [(Xfinal/Xinitial)1/N – 1] x 100). b) What was the growth rate of the GDP deflator between 1998 and 2018?
What was real GDP in 1998 measured in 2012 prices? a) What was real GDP in 2018 measured in 2012 prices? b) What was the growth rate of real GDP between 1998 and 2018? c) Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.
Chapter 8 Solutions
MACROECONOMICS - MYECONLAB >IA<
Ch. 8 - Prob. 8.1.1RQCh. 8 - Prob. 8.1.3RQCh. 8 - Prob. 8.1.4RQCh. 8 - Prob. 8.1.5RQCh. 8 - Prob. 8.1.6PACh. 8 - Prob. 8.1.7PACh. 8 - Prob. 8.1.8PACh. 8 - Prob. 8.1.9PACh. 8 - Prob. 8.1.10PACh. 8 - Prob. 8.1.11PA
Ch. 8 - Prob. 8.1.14PACh. 8 - Prob. 8.2.1RQCh. 8 - Prob. 8.2.2RQCh. 8 - Prob. 8.2.3RQCh. 8 - Prob. 8.2.4PACh. 8 - Prob. 8.2.9PACh. 8 - Prob. 8.2.10PACh. 8 - Prob. 8.3.1RQCh. 8 - Prob. 8.3.2RQCh. 8 - Prob. 8.3.3RQCh. 8 - Prob. 8.3.4PACh. 8 - Prob. 8.3.5PACh. 8 - Prob. 8.3.6PACh. 8 - Prob. 8.3.7PACh. 8 - Prob. 8.3.8PACh. 8 - Prob. 8.3.9PACh. 8 - Prob. 8.3.10PACh. 8 - Prob. 8.4.1RQCh. 8 - Prob. 8.4.3RQCh. 8 - Prob. 8.4.4PACh. 8 - Prob. 8.4.6PACh. 8 - Prob. 8.4.7PACh. 8 - Briefly discuss the accuracy of the following...Ch. 8 - Prob. 8.1RDECh. 8 - Prob. 8.2RDECh. 8 - Prob. 8.6RDECh. 8 - Prob. 8.7RDE
Knowledge Booster
Similar questions
- Why might even real GDP be a misleading index of changes in output between 1950 and 2015 in the United States?arrow_forwardLast year, a small nation with abundant forests cut down 200 worth of trees. It then turned 100 worth of trees into 150 worth of lumber. It used 100 worth of that lumber to produce $250 worth of bookshelves. Assuming the country produces no other outputs, and there are no other inputs used in producing trees, lumber, and bookshelves, what is this nations GDP? In other words, what is the value of the final goods the nation produced including trees, lumber and bookshelves?arrow_forwardRefer to the table below for a very simple economy producing three goods: movies, pizzas and cars. Steel panels are needed for car production, cheese is necessary for making pizzas and CGI service is used for movie production. What is the nominal GDP for the economy in 2021? What was the nominal GDP in 2016? What is the real GDP in 2021 using 2016 prices as base year prices? What is the real GDP growth rate between 2016 and 2021?arrow_forward
- Compare the nominal GDP growth rates and the real GDP growth rates for 2015, 2016, and 2017. What do you conclude? Which of the two accurately measures the GDP and why?arrow_forwardAn economy produces three products, bags, computers and shirts. The prices and quantities of these products in 2020 and 2021 are shown in the table below: 2020 2021 Price Price Quantity Quantity 300 $10 $12 330 Bags Computers $600 100 $650 110 Shirts $18 2,000 $20 2,200 2020 2021 Measure the nominal and real GDP for 2019 and 2020, using 2020 as the base year. Measure the nominal and real GDP growth rate in 2021. Which value is more accurate in measuring the growth rate of the economy? Explain. (b) The information on price and quantity of three products consumed by a typical household in the year 2020 and 2021 is given by the table below 2020 2021 Price Quantity Price 10 Quantity $5 $5.50 12 Fish Beef $10 5 $11 4 Train Ride $8 20 $9 22 Using 2020 as the base year, measure the CPI for 2021 and the inflation rate in 2021. Does this inflation rate correctly measure the cost of living changes for households in 2021? Explain.arrow_forwardUse the following data to answer this question. a. Calculate real GDP in 2006, 2008, & 2010 in 2005 dollars. b. What was the percent change in real GDP between 2006 and 2008? What was the percent change between 2008 and 2010?arrow_forward
- The following table contains nominal and real GDP data, in billions of dollars, from the U.S. Bureau of Economic Analysis for 2016 and 2018. The data is listed per quarter, and the real GDP data was calculated using 2009 as the base year. Fill in the columns for the GDP deflator, for the percent increase in the price level, and economic growth rate. (Note: Rounding to three decimal points for GDP deflator and to the nearest tenth for price increase and economic growth rate) Quarter 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 Nominal GDP 18,325.2 18,538.0 18,729.1 18,905.5 19,057.7 19,250.6 19,500.6 19,754.1 20,098.8 Real GDP 16,571.6 16,663.5 16,778.1 16,851.4 16,903.2 17,031.1 17,163.9 17,286.5 17.457.6 GDP Deflator What is the value of the following indicators in the 2017 Q2 for: GDP deflator? percent Increase in Price Level? economic Growth rate? Percent Increase in Price Level (%) (rounding to three decimal points) What is the value of the following…arrow_forward1. Why the use real GDP is preferred by economists over nominal GDP to gauge economic well-being? (Word count: 100 words max.) 2. Consider the following data on the Pakistan economy: Nominal GDP GDP Deflator Year (in billions of rupees) (base year 2012) 2018 21,501 111.4 1998 9,163 76.3 What was the growth rate of nominal GDP between 1998 and 2018? (Hint: The growth rate of a variable X over an N-year period is calculated as [(Xfinal/Xinitial)1/N – 1] x 100). What was the growth rate of the GDP deflator between 1998 and 2018? What was real GDP in 1998 measured in 2012 prices? What was real GDP in 2018 measured in 2012 prices? What was the growth rate of real GDP between 1998 and 2018? Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.arrow_forwardComplete the table below calculating Real GDP for all years (show your work for at least one year!) and answer the following: Nominal GDP, Deflator, and Real GDP Year Nominal GDP (billions of dollars) GDP Deflator 7,000 8,350 9,740 10,120 11,111 12,582 Real GDP 2010 100 2011 111.3 2012 116.6 2013 107.5 2014 102.4 2015 109.7 a. By looking at the table, which year is the Base Year? Justify your answer! b. Calculate the Real GDP growth from 2010 to 2015. Show your work!arrow_forward
- Based on the graph, how many recessions has France economy undergone over the years plotted in the chart? Remember shaded areas shows recession. What are the two biggest recessions in terms of length and magnitude? 2020 is not included.arrow_forwardQ2. The table below shows CHINA'S NOMINAL AND REAL GDP for the years 1974 through years 1976. YEAR NOMINAL GDP (Billions of Yuan) REAL GDP (Billions of constant 1987 Yuan) 1974 279.6 397.6 1975 298.1 430.3 1976 289.0 408.4 (a) What is the difference between what NOMINAL GDP tells us and what REAL GDP (constant YUAN) tells us? Explain by referring to the way real GDP is calculated in principle compared with the way nominal. (b) GDP is calculated (HINT: Think about prices and quantities). (c) Calculate the GDP growth rates for CHINA for 1974 to 1975 and for 1975 to 1976. SHOW YOUR WORK. (d) Find the GDP deflator for each of the three years. SHOW YOUR WORK. (e) Find the rates of inflation for 1974 to 1975 and for 1975 to 1976. SHOW YOUR WORK. Q3. Suppose you are provided with the following information about an economy. There are 100 million working-age individuals in the economy. Of these 100 million, 50 million are currently working, 10 million are looking for work, 10 million stopped…arrow_forwardAs you learned in the most recent chapter, GDP is the broadest measure of economic health in the U.S. Therefore, the discussion forum for the week will ask you to discuss GDP in your own words. Specifically, Business leaders, Government officials, and investors are often fixated on GDP results and economic growth. Why? What does it matter? The same level of interest is given to productivity. What is it and why does it matter in the scheme of things? What does GDP fail to tell us?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co...EconomicsISBN:9781305280601Author:William J. Baumol, Alan S. BlinderPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co...
Economics
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning