Nominal GDP .

Question

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Answer 1

Question

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

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Answer 2

Question

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

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Answer 3

Question

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

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Answer 5

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Answer 6

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Answer 7

Chapter 10, Problem 6PA

Sub part (a):

To determine

Nominal GDP.

Answer 8

Sub part (a):

Expert Solution

Explanation of Solution

The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy. The Nominal GDP is the GDP calculated at the current prices. 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.

The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:

Nominal GDPYear 1=Quantity producedYear 1×per unit priceYear 1=3×4=12

Thus, the Nominal GDP of year 1 is $12.

Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:

Nominal GDPYear 2=Quantity producedYear 2×per unit priceYear 2=4×5=20

Thus, the Nominal GDP of year 2 is $20.

The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:

Nominal GDPYear 3=Quantity producedYear 3×per unit priceYear 3=5×6=30

Thus, the Nominal GDP of year 3 is $30.

Answer 9

Sub part (a):

Expert Solution

Answer 10

Sub part (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.

Answer 13

Sub part (b):

To determine

Real GDP.

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Answer 14

Sub part (b):

To determine

Real GDP.

Answer 15

Sub part (b):

Expert Solution

Explanation of Solution

The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.

The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:

Real GDPYear 2=Quantity producedYear 2×per unit priceYear 1=4×4=16

Thus, the Real GDP of year 2 is $16.

The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:

Real GDPYear 3=Quantity producedYear 3×per unit priceYear 1=5×4=20

Thus, the Real GDP of year 3 is $20.

Answer 16

Sub part (b):

Expert Solution

Answer 17

Sub part (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Answer 20

Sub part (c):

To determine

GDP deflator.

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Answer 21

Sub part (c):

To determine

GDP deflator.

Answer 22

Sub part (c):

Expert Solution

Explanation of Solution

The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:

GDP DeflatorYear 1=Nominal GDPYear 1Real GDPYear 2×100

Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:

GDP Deflatoryear 1=Nominal GDPYear 1Real GDPYear 2×100=1212×100=100

Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:

GDP DeflatorYear 2=Nominal GDPYear 2Real GDPYear 2×100=2016×100=125

Thus, the GDP deflator in Year 2 is 125.

The GDP deflator for year 3 can be calculated as follows:

GDP DeflatorYear 3=Nominal GDPYear 3Real GDPYear 3×100=3020×100=150

Thus, the GDP deflator in Year 3 is 150.

Answer 23

Sub part (c):

Expert Solution

Answer 24

Sub part (c):

Expert Solution

Answer 25

Expert Solution

Answer 26

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

GDP deflator: It is an implicit price deflator.

Answer 27

Sub part (d):

To determine

Growth of Real GDP.

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Answer 28

Sub part (d):

To determine

Growth of Real GDP.

Answer 29

Sub part (d):

Expert Solution

Explanation of Solution

The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:

Growth rateReal GDP=(Real GDPYear 3−Real GDPYear 2)Real GDPYear 2×100=(20−16)16×100=25

Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.

Answer 30

Sub part (d):

Expert Solution

Answer 31

Sub part (d):

Expert Solution

Answer 32

Expert Solution

Answer 33

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Answer 34

Sub part (e):

To determine

Growth rate of inflation.

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Answer 35

Sub part (e):

To determine

Growth rate of inflation.

Answer 36

Sub part (e):

Expert Solution

Explanation of Solution

The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:

Inflation rate=(GDP deflatorYear 3−GDP deflatorYear 2)GDP deflatorYear 2×100=(150−125)125×100=20

Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.

Answer 37

Sub part (e):

Expert Solution

Answer 38

Sub part (e):

Expert Solution

Answer 39

Expert Solution

Answer 40

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Answer 41

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.

Answer 42

Sub part (f):

To determine

Growth rate of Real GDP and inflation rate.

Answer 43

Sub part (f):

Expert Solution

Explanation of Solution

The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.

Answer 44

Sub part (f):

Expert Solution

Answer 45

Sub part (f):

Expert Solution

Answer 46

Expert Solution

Answer 47

Economics Concept Introduction

Concept introduction:

Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.

Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.

Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.