Question

Jump to... Yong Ch rough -MGEA06 Macroeconomics-Winter19-AU Activities and Due Dates > Assignment 1 ent Score: 9 of 16 1584/1600 Resources Next Questi My Attemp Table: Price and Output Data Output 3 base period 4 Use Table: Price and Output Data. Between years 4 and 5.of the increase in nominal GDP was due to infation. ○all o 92% o 58% 0 none ed

Answer 1

Base Year = 3

Calculate the nominal GDP in year 4 -

Nominal GDP = Output in Year 4 * Price in Year 4

Nominal GDP = 6 * $6 = $36

The nominal GDP in Year 4 is $36.

Calculate the nominal GDP in year 5 -

Nominal GDP = Output in Year 5 * Price in Year 5

Nominal GDP = 7 * $9 = $63

The nominal GDP in Year 5 is $63.

Calculate the growth rate of nominal GDP between year 4 and year 5 -

Growth rate = [(Nominal GDP in Year 5 - Nominal GDP in Year 4)/Nominal GDP in Year 4] * 100

Growth rate = [($63 - $36)/$36] * 100

Growth rate = 75%

The nominal GDP growth rate is 75%.

Calculate the real GDP in year 4 -

Real GDP = Output in Year 4 * Price in Year 3

Real GDP = 6 * $5 = $30

The real GDP in Year 4 is $30.

Calculate the real GDP in year 5 -

Real GDP = Output in Year 5 * Price in Year 3

Real GDP = 7 * $5 = $35

The Real GDP in Year 5 is $35.

Calculate the growth rate of real GDP between year 4 and year 5 -

Growth rate = [(Real GDP in Year 5 - Real GDP in Year 4)/Real GDP in Year 4] * 100

Growth rate = [($35 - $30)/$30] * 100

Growth rate = 16.67% or 17%

The real GDP growth rate is 17%.

Calculate the increase in nominal GDP due to inflation -

Increase = Nominal GDP growth rate - Real GDP growth rate

Increase = 75% - 17% = 58%

So,

Between year 4 and 5, 58% of the increase in nominal GDP was due to inflation.

Hence, the correct answer is the option (3) [58 percent].