Question

CH8

Suppose an economy produces three final products. Use the following table to calculate GDP and economic growth rate.

Product	Base year price	Price in 2014	Price in 2015	Price in 2016	Output 2014	Output 2015	Output 2016
A	$2.00	$3.00	$3.30	$3.60	150	160	170
B	$3.00	$4.50	$4.80	$5.00	100	110	130
C	$4.00	$5.50	$6.00	$6.30	110	120	125

Fill in the blanks of the next table. Numbers only without thousand separator.

Item	Value
nominal GDP in 2014
nominal GDP in 2015
nominal GDP in 2016
real GDP in 2014
real GDP in 2015
real GDP in 2016
economic growth rate for 2016	%

An economy has four final products, A, B, C, and D. Please use the output and price information to complete the following table and answer questions. Do NOT use thousand separators and ignore decimals (e.g., two thousand as 2000).

Product	Base Year Price (a)	Price 2016 (b)	Price 2017 (c)	Output 2016 (d)	Output 2017 (e)	Nominal value 2016 (b*d)	Real value 2016 (a*d)	Nominal value 2017 (c*e)	Real value 2017 (a*e)
A	$20	$22	$23	500	550
B	$50	$55	$56	400	420
C	$25	$30	$31	1000	1050
D	$100	$105	$106	100	100
Nominal GDP
Real GDP

The real GDP growth rate in 2017 =   % (e.g., 7%)

Michigan based GM's production of Buicks in China is part of ________ GDP and part of _______ GNP; Japan's Honda's production of Accords in Kentucky is part of ______ GDP and part of _________ GNP, respectively.

• A. China's; the U.S.; the U.S.; Japan's.

• B. China's; the U.S.; the U.S.; the U.S..

• C. U.S.; the U.S.; the U.S.; Japan's.

• D. China's; the U.S.; Japan's; the U.S..

quiz 7

Answer 1

Product	Base year price	Price in 2014	Price in 2015	Price in 2016	Output 2014	Output 2015	Output 2016
A	$2.00	$3.00	$3.30	$3.60	150	160	170
B	$3.00	$4.50	$4.80	$5.00	100	110	130
C	$4.00	$5.50	$6.00	$6.30	110	120	125

Nominal GDP in a year = (Price of the product in that year * Quantity of the product in that year)

Nominal GDP in 2014 = $( 3*150 +  4.5*100 + 5.5*110 ) = $1505

Nominal GDP in 2015 = $( 3.3*160 + 4.8*110 + 6*120 ) = $1776

Nominal GDP in 2015 = $( 3.6*170 + 5*130 + 6.3*125 ) = $2049.5

Real GDP in a year = (Price of the product in base year * Quantity of the product in that year)

Real GDP in 2014 = $( 2*150 + 3*100 + 4*110) = $1040

Real GDP in 2015 = $( 2*160 + 3*110 + 4*120) = $1130

Real GDP in 2016 = $( 2*170 + 3*130 + 4*125) = $1230

Economic growth rate for 2016 = [(Real GDp in 2016 - Real GDP in 2015)/Real GDP in 2015]*100 = (

or, Economic growth rate for 2016= [($1230 - $1130)/$1130]*100% = (100/1130)*100% = 0.0885*100 % = 8.85%

Hence, the economic growth rate for 2016 is 8.85% (rounded to 2 decimal place)