In: Economics
Consider the following information.
2010 (base year) 2011
Price Quantity Price Quantity
Car $100 400 $120 420
Rice $25 2,000 $36 2,005
2012
Price Quantity
Car $130 450
Rice $38 2,100
a) Nominal GDP in 2010 = 100x400+25x2000 = 90000
Real GDP in 2010 = same as nominal GDP as it is the base year = 90000
GDP Deflator = Nominal GDP/Real GDP x100 = 90000/90000x100=100
Nominal GDP in 2011 = 120x420+36x2005 = 122580
Real GDP in 2011=100x420+25x2005=92125
GDP Deflator = 122580/92125x100 = 133
Nominal GDP in 2012 = 130x450+38x2100=138300
Real GDP in 2012=100x450+25x2100 = 97500
GDP Deflator = 138300/97500x100=142
b) Percentage change in Nominal GDP
year 2011=122580-90000/90000x100 = 36.2%
year 2012 = 138300-122580/122580x100 = 12.82%
Percentage change in Real GDP
year 2011 = 92125-90000/90000x100= 2.36%
year 2012 = 97500-92125/92125x100 = 5.83%
Percentage change in GDP Deflator
year 2011 = 133-100/100x100=33%
year 2012 = 142-133/133x100=6.76%
c) The economic well being rose more in the year 2012 than 2011 as the percentage change in real GDP is more in year 2012 than in year 2011.