Question

In: Economics

A. Suppose that nominal GDP was $13 trillion in 2040 in Bedrock. In 2050, nominal GDP was $15 trillion in Bedrock.

A. Suppose that nominal GDP was $13 trillion in 2040 in Bedrock. In 2050, nominal GDP was $15 trillion in Bedrock. The price level fell 5% between 2040 and 2050, and population growth was 1%.

Between 2040 and 2050 in Bedrock, nominal GDP growth was ???? % and economic growth was ????? %. Give your answers to one decimal place.

B. Suppose that nominal GDP was $20 trillion in 2040 in Bedrock. In 2050, nominal GDP was $18 trillion in Bedrock. The price level rose 5% between 2040 and 2050, and population growth was 1%.

Between 2040 and 2050 in Bedrock, nominal GDP growth was ????? % and economic growth was ????? %. Give your answers to one decimal place.

Suppose that nominal GDP was $8 trillion in 2040 in Bedrock. In 2050, nominal GDP was $10 trillion in Bedrock. The price level rose 16.0% between 2040 and 2050, and population growth was 13.0%.

Between 2040 and 2050 in Bedrock, nominal GDP growth was ???? % and economic growth was ???? %.Give your answers to one decimal place.

Solutions

Expert Solution

Answer:

Formula for Nominal GDP Growth rate

= (Current Nominal GDP / Real GDP) * 100

Formula of Real GDP

= (Current Nominal GDP / GDP Deflator) * 100

GDP Deflator

= 100 +/- price level

( + increase / - decrease)

Formula for Economic Growth

= % rate of increase in Real GDP

(OR)

= Population growth rate + growth in per capita gdp

----------

(3)

(A) Nominal GDP of 2050 (Current) = 15 Trillion

GDP Deflator = 100 - 5 = 95

(Price level fell, so, -5 )

Real GDP (in trillions)

= (15 / 95) x 100

= 15.789 trillions

Hence growth rate of nominal GDP

= (15 / 15.789) x 100

= 95%

------------------

[Please note :

Economic growth cannot be calculated as there is no old gdp (of 2040) provided to calculate % change in GDP

Also, total population is also not provided for calculating growth in per capita GDP. ]

-----------------

(B) Nominal GDP of 2050 = 18 Trillion

GDP Deflator

= 100 + 5 = 105

(Price level rose, so, +5)

Real GDP = (18 / 105) x 100

= 17.143 Trillions

Hence, nominal GDP growth rate

= ( 18 / 17.143 ) x 100

= 105%

-------------

(C) Nominal GDP of 2050 = 10 Trillions

GDP Deflator

= 100 + 16 = 116

(Price level rose, so, +16 )

Real GDP = (10 / 116) x 100

= 8.62 Trillions

Hence, nominal GDP growth rate

= ( 10 / 8.62 ) x 100

= 116%

Rahul Sunny answered 1 year ago

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