Question

In: Economics

The following are the values of goods and services produced in 2018 and 2019 utilizing the...

The following are the values of goods and services produced in 2018 and 2019 utilizing the prices prevailing in those two years. Compute the Chain-weighted Real GDP for 2019. (Show your work).

Prices Utilized	Values of Goods and Services of the years ($million)
	2018	2019
2018	112.4	138.2
2019	118.3	146.5

Expert Solution

Answer :-

In order to calculate the chain weighted Real GDP for 2019, we need the following information;

Value of goods and services produced in 2018 at price of 2018 = $112.4 million

Value of goods and services produced in 2019 at the price 2018 = $138.2 million

Value of goods and services produced in 2018 at the price of 2019 = $118.3 million

Value of goods and services produced in 2019 at the price of 2019 =146.5

The growth rate with 2018 prices can be calculated as ;

= [(138.2-112.4)/112.4]×100

= 0.2295×100

= 22.95 %

NOW the growth rate with 2019 prices is given by ;

=[(146.5-118.3)/118.3]×100

0.2383×100

= 23.83 %

The chain weighted growth rate can be calculated by the average of the two growth rates, therefore

= (22.95 +23.83 )/ 2

= 23.39 %

Chain weighted real GDP for 2019 is given by the relation ;

= Real GDP in 2018 + chain weighted growth rate of real GDP in 2018

= 112.4 + 23.39 % of 112.4

= $138.69 million

Hence the chain weight real GDP for 2019 is $138.69 million.

Rahul Sunny answered 3 years ago

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