Consider an economy that produces 4 goods. Unless otherwise stated, 2017 is the base year. Quantity Price Product 2017 2018 2017 2018 A 5 7 $30 $40 B 6 4 $20 $40 C 8 12 $15 $20 D 3 5 $100 $110 1. Calculate nominal and real GDP for 2017 and 2018. What is the GDP deflator in 2017 and 2018? What is the corresponding annual growth rate of the economy and the annual inflation rate? This has been answered Real GDP is the value of goods and services produced in an economy in an year, taken at base year prices Nominal GDP is the value of goods and services produced in an economy in an year taken at current year prices GDP deflator is given by formula: (Nominal GDP/Real GDP)*100 annual growth rate of economy is given by formula: current GDP minus the pervious year GDP divided by the previous year GDP Inflation is calculated as the current GDP deflator - previous GDP deflator whole divided by the previous year GDP deflator multiplied by 100 Quantity Price Value at current prices value at base price 2017 Product 2017 2018 2017 2018 2017 2018 2017 2018 A 5 7 30 40 150 280 150 210 B 6 4 20 40 120 160 120 80 C 8 12 15 20 120 240 120 180 D 3 5 100 110 300 550 300 500 Nominal GDP 2017= 690 Nominal GDP 2018 = 1230 real GDP 2017 = 690 Real GDP 2018 = 970 GDP deflator 2017 100 GDP deflator 2018 126.804124 annual Growth rate 78.26087% Inflation rate 26.80412% 2. Calculate the CPI for 2017 and 2018 (Hint: calculate the cost of the basket), as well as the annual CPI inflation rate. Why is GDP deflator inflation rate lower?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Measuring A Nation's Income

Section: Chapter Questions

Problem 6PA

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Consider an economy that produces 4 goods. Unless otherwise stated, 2017 is the base year.

	Quantity		Price
Product	2017	2018	2017	2018
A	5	7	$30	$40
B	6	4	$20	$40
C	8	12	$15	$20
D	3	5	$100	$110

1. Calculate nominal and real GDP for 2017 and 2018. What is the GDP deflator in 2017 and 2018? What is the corresponding annual growth rate of the economy and the annual inflation rate?

***This has been answered***

Real GDP is the value of goods and services produced in an economy in an year, taken at base year prices

Nominal GDP is the value of goods and services produced in an economy in an year taken at current year prices

GDP deflator is given by formula: (Nominal GDP/Real GDP)*100

annual growth rate of economy is given by formula: current GDP minus the pervious year GDP divided by the previous year GDP

Inflation is calculated as the current GDP deflator - previous GDP deflator whole divided by the previous year GDP deflator multiplied by 100

	Quantity	Price	Value at current prices	value at base price 2017
Product	2017	2018	2017	2018	2017	2018	2017	2018
A	5	7	30	40	150	280	150	210
B	6	4	20	40	120	160	120	80
C	8	12	15	20	120	240	120	180
D	3	5	100	110	300	550	300	500
					Nominal GDP 2017= 690	Nominal GDP 2018 = 1230	real GDP 2017 = 690	Real GDP 2018 = 970

GDP deflator 2017	100
GDP deflator 2018	126.804124

annual Growth rate

78.26087%

Inflation rate

26.80412%

2. Calculate the CPI for 2017 and 2018 (Hint: calculate the cost of the basket), as well as the annual CPI inflation rate. Why is GDP deflator inflation rate lower?

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