Question

In: Economics

1. The economy of Britannica produces three goods: computers, DVDs, and pizza. The accompanying table shows...

1. The economy of Britannica produces three goods: computers, DVDs, and pizza. The accompanying table shows the prices and output of the three goods for the years 2012, 2013, and 2014. Computers DVDs Pizzas Year Price Quantity Price Quantity Price Quantity 2012 $700 12 $12 120 $22 4 2013 $825 12.5 $14 125 $23 7 2014 1,150 14 $15 138 $24 9 Calculate nominal GDP in Britannica for 2012,2013,2014;What is the GDP Growth rate from 2012 to 2014? Calculate real GDP in Britannica for 2012, 2013, 2014. Assume the base year is 2012. What is the GDP growth rate from 2012-2014. Compare the growth rates for Nominal and Real GDP, how much of the growth in Nominal GDP was due to inflation

Solutions

Expert Solution

We have the following information

Year

Computers

DVDs

Pizza

Nominal GDP ($)

Price ($)

Quantity

Price ($)

Quantity

Price ($)

Quantity

2012

       700.0

         12.0

         12.0

       120.0

         22.0

           4.0

          9,928.0

2013

       825.0

         12.5

         14.0

       125.0

         23.0

           7.0

        12,223.5

2014

    1,150.0

         14.0

         15.0

       138.0

         24.0

           9.0

        18,386.0

Compound Annual Growth Rate (CAGR) = (GDP in 2014 ÷ GDP in 2012)1/N-1 – 1

N = Number of Years

CAGR = (18,386 ÷ 9928)1/2 – 1

CAGR = 36.1%

Consumer Price Index (CPI) = (Ʃp1q0/Ʃp0q0) × 100

In the above, p1 is the current year price; p0 is base year price; q0 is base year quantity. In the present case the base year is 2012.

Commodity

q0 (2012)

p0 (2012)

p1 (2013)

p1q0

p0q0

Computers

         12.0

       700.0

       825.0

      9,900.0

    8,400.0

DVDs

       120.0

         12.0

         14.0

      1,680.0

    1,440.0

Pizza

           4.0

         22.0

         23.0

            92.0

         88.0

Total

    11,672.0

    9,928.0

CPI for 2013 = (11,672.0/9,928.0) × 100 = 117.6

Commodity

q0 (2012)

p0 (2012)

p1 (2014)

p1q0

p0q0

Computers

         12.0

       700.0

    1,150.0

    13,800.0

    8,400.0

DVDs

       120.0

         12.0

         15.0

      1,800.0

    1,440.0

Pizza

           4.0

         22.0

         24.0

            96.0

         88.0

Total

    15,696.0

    9,928.0

CPI for 2013 = (15,696.0/9,928.0) × 100 = 158.1

Year

Nominal GDP ($)

CPI

Real GDP ($)

2012

          9,928.0

       100.0

      9,928.0

2013

        12,223.5

117.6

    10,397.1

2014

        18,386.0

158.1

    11,629.5

Compound Annual Growth Rate (CAGR) of Real GDP = (Real GDP in 2014 ÷ Real GDP in 2012)1/N-1 – 1

N = Number of Years

CAGR = (11,629.5 ÷ 9,928.0)1/2 – 1

CAGR = 8.2%

So, 27.9 percentage points increase in the annual GDP from 2012 to 2014 was due to inflation.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Consider a simple economy that produces two goods: apples and envelopes. The following table shows the...
Consider a simple economy that produces two goods: apples and envelopes. The following table shows the prices and quantities of the goods over a three-year period. Year Apples Envelopes Price Quantity Price Quantity (Dollars per apple) (Number of apples) (Dollars per envelope) (Number of envelopes) 2018 1 145 2 195 2019 2 165 4 225 2020 3 110 4 165 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: pens and oranges. The following table shows the...
Consider a simple economy that produces two goods: pens and oranges. The following table shows the prices and quantities of the goods over a three-year period. Year Pens Oranges Price Quantity Price Quantity (Dollars per pen) (Number of pens) (Dollars per orange) (Number of oranges) 2017 1 120 2 190 2018 2 160 4 200 2019 3 130 4 195 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: pens and muffins. The following table shows the...
Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Pens Muffins Price Quantity Price Quantity (Dollars per pen) (Number of pens) (Dollars per muffin) (Number of muffins) 2015 1 110 1 180 2016 2 140 4 210 2017 4 100 4 190 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: apples and erasers. The following table shows the...
Consider a simple economy that produces two goods: apples and erasers. The following table shows the prices and quantities of the goods over a three-year period. Year Apples Erasers Price Quantity Price Quantity (Dollars per apple) (Number of apples) (Dollars per eraser) (Number of erasers) 2012 1 110 2 150 2013 2 155 4 215 2014 3 120 4 180 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: pencils and envelopes. The following table shows the...
Consider a simple economy that produces two goods: pencils and envelopes. The following table shows the prices and quantities of the goods over a three-year period. Year Pencils Envelopes Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per envelope) (Number of envelopes) 2016 1 110 2 150 2017 2 155 4 215 2018 3 120 4 180 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the...
Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Cupcakes Muffins Price Quantity Price Quantity (Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins) 2012 1 120 1 195 2013 2 130 4 195 2014 4 130 4 145 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: pens and erasers. The following table shows the...
Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three-year period. Year Pens Erasers Price Quantity Price Quantity (Dollars per pen) (Number of pens) (Dollars per eraser) (Number of erasers) 2013 1 120 1 170 2014 2 170 4 230 2015 2 110 4 165 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator...
Consider a simple economy that produces two goods: pencils and muffins. The following table shows the...
Consider a simple economy that produces two goods: pencils and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Pencils Muffins Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per muffin) (Number of muffins) 2018 1 120 1 195 2019 2 130 4 195 2020 4 130 4 145 From 2019 to 2020, nominal GDP   , and real GDP   . The inflation rate in 2020 was   . Why is...
Consider a simple economy that produces two goods: pencils and muffins. The following table shows the...
Consider a simple economy that produces two goods: pencils and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Pencils Muffins Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per muffin) (Number of muffins) 2012 2 115 5 175 2013 4 150 2 180 2014 1 100 2 160 Use the information from the preceding table to fill in the following table. Year Nominal GDP (dollars) Real GDP (base...
There is a small place that makes pizza produces three goods (bread, cheese, and pizza), each...
There is a small place that makes pizza produces three goods (bread, cheese, and pizza), each produced by a separate company. The bread and cheese companies produce all the inputs they need to make bread and cheese, respectively. The pizza company uses the bread and cheese from the other companies to make its pizzas. All three companies employ labour to help produce their goods, and the difference between the value of goods sold and the sum of labour and input...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT