(a)
Identify the 2013 and 2014 real
(a)
Explanation of Solution
Table-1 shows the value of nominal GDP and the GDP deflator as follows:
Table-1 | ||||
Nominal GDP (Billions of currency) |
GDP deflator (2010=100) | |||
Country | 2013 | 2014 | 2013 | 2014 |
U | 16,663.2 | 17,348.1 | 105.6 | 107.4 |
C | 1,879.5 | 1,976.2 | 108.1 | 110.9 |
J | 482,430 | 489,623 | 97.2 | 98.8 |
I | 1,609.5 | 1,616.3 | 103.9 | 105 |
A | 1,554.8 | 1,599.8 | 105.5 | 105.8 |
UK | 1,713.1 | 1,791.5 | 104.3 | 106 |
The real GDP can be calculated using the formula as follows:
Use Equation-1 to calculate the real GDP of Country U in 2013 as follows:
Therefore, the real GDP of Country U in 2013 is $15,779.54 billion.
Table-2 shows the value of the real GDP in 2013 and 2014, which is calculated using Equation-1 as follows:
Table-2 | ||||||
Nominal GDP | GDP deflator | Real GDP | ||||
Country | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 |
U | 16,663.2 | 17,348.1 | 105.6 | 107.4 | 15,779.5 | 16,152.8 |
C | 1,879.5 | 1,976.2 | 108.1 | 110.9 | 1,738.67 | 1,781.97 |
J | 482,430 | 489,623 | 97.2 | 98.8 | 496,327 | 495,570 |
I | 1,609.5 | 1,616.3 | 103.9 | 105 | 1,549.09 | 1,539.33 |
A | 1,554.8 | 1,599.8 | 105.5 | 105.8 | 1,473.74 | 1,512.10 |
UK | 1,713.1 | 1,791.5 | 104.3 | 106 | 1,642.47 | 1,690.09 |
(b)
Identify the inflation rate in 2014.
(b)
Explanation of Solution
The inflation rate in 2014 can be calculated using the formula as follows:
Use Equation-2 to calculate the inflation rate of Country U in 2014 as follows:
Therefore, the inflation rate is 1.70%.
Table-3 shows the value of the inflation rate, which is calculated using Equation-2 as follows:
Table-3 | |||||||
Nominal GDP | GDP deflator | Real GDP | Inflation rate | ||||
Country | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2014 |
U | 16,663.2 | 17,348.1 | 105.6 | 107.4 | 15,779.5 | 16,152.8 | 1.70% |
C | 1,879.5 | 1,976.2 | 108.1 | 110.9 | 1,738.67 | 1,781.97 | 2.59% |
J | 482,430 | 489,623 | 97.2 | 98.8 | 496,327 | 495,570 | 1.65% |
I | 1,609.5 | 1,616.3 | 103.9 | 105 | 1,549.09 | 1,539.33 | 1.06% |
A | 1,554.8 | 1,599.8 | 105.5 | 105.8 | 1,473.74 | 1,512.1 | 0.28% |
UK | 1,713.1 | 1,791.5 | 104.3 | 106 | 1,642.47 | 1,690.09 | 1.63% |
(c)
Identify the country that has the highest growth rate of real GDP.
(c)
Explanation of Solution
The growth rate can be calculated using the formula as follows:
Use Equatrion-3 to calculate the growth rate of real GDP as follows:
Therefore, the growth rate of real GDP is 2.36%.
Table-4 shows the growth rate in 2014, which is calculated using the Equation-3 as follows:
Table-4 | ||||||||
Nominal GDP | GDP deflator | Real GDP | Inflation rate | Growth rate | ||||
Country | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2014 | 2014 |
U | 16,663.2 | 17,348.1 | 105.6 | 107.4 | 15,779.5 | 16,152.8 | 1.70% | 2.37% |
C | 1,879.5 | 1,976.2 | 108.1 | 110.9 | 1,738.67 | 1,781.97 | 2.59% | 2.49% |
J | 482,430 | 489,623 | 97.2 | 98.8 | 496,327 | 495,570 | 1.65% | -0.15% |
I | 1,609.5 | 1,616.3 | 103.9 | 105 | 1,549.09 | 1,539.33 | 1.06% | -0.63% |
A | 1,554.8 | 1,599.8 | 105.5 | 105.8 | 1,473.74 | 1,512.1 | 0.28% | 2.60% |
UK | 1,713.1 | 1,791.5 | 104.3 | 106 | 1,642.47 | 1,690.09 | 1.63% | 2.90% |
According to Table-4, Country UK has the highest growth rate of real GDP, which is 2.90% and Country J has the lowest growth rate of real GDP, which is -0.15%.
(d)
Identify the countries that have the highest and lowest inflation rate.
(d)
Explanation of Solution
According to Table-3, Country C has the highest inflation rate, which is 2.59% and Country A has the lowest inflation rate, which is 0.28%.
(e)
Identify the country that has the most inflation
(e)
Explanation of Solution
According to the data from Table-4, Country C has the highest inflation rate, which is 2.59%. Therefore, Country C has the most inflation during 2014.
Inflation: Inflation is a sustained rise in the price level of a selected basket of goods and service for a particular period.
Want to see more full solutions like this?
Chapter 8 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
- Why might even real GDP be a misleading index of changes in output between 1950 and 2015 in the United States?arrow_forwardThe country of Calico has produced the following quantity of gauges and potatoes, with the price of each listed in dollar terms. a. Using 2000 as the base year, what is the growth rate of real GDP from 2000 to 2010? b. Based on the GDP deflator, what is the inflation rate from 2000 to 2010?arrow_forward1. The following prices and quantities produced were recorded in computer land during the years shown and Calculate the following and show your work. a) What was the GDP deflator in 1993? b) Using the GDP deflator what was the average annual rate of inflation during 1993 and 1994?arrow_forward
- Suppose that nominal GDP was $9250000.00 in 2005 in Orange County California. In 2015, nominal GDP was $12000000.00 in Orange County California. The price level rose 2.00% between 2005 and 2015, and population growth was 3.25%. Calculate the following figures for Orange County California between 2005 and 2015. Give all answers to two decimals. a. Nominal GDP growth was b. Economic growth was %. c. Inflation was d. Real GDP growth was e. Per capita GDP growth was f. Real per capita GDP growth wasarrow_forward(a) Use the following table to calculate GDP price deflator in 2019 and 2020 and the change in the overall price level from 2019 to 2020. You will need to round your answer to the nearest whole number. GDP 2019 2020 Nominal GDP $26 000 $28 000 Real GDP $21 000 $22 000 (b) Consider an economy only producing two goods: pen and bread in both Year 1 and Year 2. Can the Real GDP of this economy increase between Year 1 and Year 2, while the Nominal GDP decreases or remains the same? Explain your answer with a numerical example.arrow_forwardThe table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate % change for City A’s total spending from 2010 to 2020 in current dollars. *Results round to the nearest 2 decimal places. Calculate % change for City A’s total spending from 2010 to 2020 in constant dollars. *Results round to the nearest 2 decimal places. Why does % change calculated from constant dollars differ from % change calculated from current dollar? Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. 2010 per capita spending: 2020 per capita spending: Calculate the compound annual growth rate of per capita spending from 2010 to 2020…arrow_forward
- What is the difference between using a measure of inflation such as the consumer prices index (CPI) and the GDP deflator? Which do you think is the more accurate measure of price changes in an economy?arrow_forwardQuestion 1: In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017. year Price of Car (AED) Number of Car Price of cycle (AED) Number of cycle 2017 1000 10 200 900 2018 1200 15 210 1000 2019 1500 25 250 1500 Question 2: Explain the role of fiscal and monetary policy in an economy facing a recession. Use appropriate graph to justify your answerarrow_forwardFrance produces two goods: milk and wheat. Below is a table showing prices and quantities of output for three years: Year Price of milk Quantity of milk Price of wheat Quantity of wheat 2019 €1 200 €2.9 300 2020 €1.2 250 €3 330 2021 €1.4 280 €3.2 375 The nominal GDP for 2021 is Assuming 2019 to be the base year, the real GDP for 2021 is GD deflator for 2021 is a) France's Office of National Statistics decides to determine the following representative bundle of goods and services purchased by a typical consumer: 5 milk products and 4 wheat products. The CPI in 2021 (assume 2019 to be the base year) is The yearly inflation rate for 2021 isarrow_forward
- Question # 5 a: Calculate Nominal and Real GDP for each year. Consider the base year is 2013. YearBottles of Diet Coke (units)Price by Bottle in Rs 2013100,00010.25 2014400,00030.50 2015500,00030.75 2016800,00040.25 b: Analyze how much Pakistan’s GDP and each of its components is affected by the following transactions? Explain your answers (Maximum 200 words). i) Toyota Motors issues new shares to finance the construction of an automobile plant in Pakistan.ii) Your friend wins Rs.2 million in the lottery in Dubai iii) Rabia spends Rs.1500 to buy her husband dinner at the finest restaurant in Karachiiv) General Motors builds Rs.40 million worth of cars, but consumers only buy Rs. 38 million worth of them.v) Sadia spends 50000 on a computer to use in her editing business in Karachi. She got last year’s model on sale for a great price from a local manufacturer. (Sub parts to solved).arrow_forwardThe country of Sportstown produces two goods: footballs and basketballs. Below is a table showing prices and quantities of output for three years: Quantity of Basketballs Year Price of Quantity of Footballs Price of Footballs Basketballs Year 1 $10 120 $12 200 Year 2 12 200 15 300 Year 3 14 180 18 275 Nominal GDP in Year 1 = Nominal GDP in Year 2 = Nominal GDP in Year 3 =arrow_forwardWhy 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.arrow_forward
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning