Question

Attempts: Keep the Highest: 3 6. Problems and Applications Q6 Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 2 bars and the price is $5. In year 2. the quantity produced is 4 bars and the price is 18. In year 3, the quantity produced is 8 bars and the price is $10. Using year 1 as the base year, compute nominal GOP, real GOP, and the GOP deflator for each year, Nominal GDP Real GDP (Dollars) (Dollars) GDP Deflator Year Year 1 Year 2 Year 3 The percentage growth rate of real GDP from year 2 to year is The inflation rate as measured by the GDP deflator from year 2 to year 3 is Grade NOW Save & Continue Continue without saving

Answer 1

Year Nominal GDP Real GDP GDP Deflator 1 2 3 2*5= $10 4*8= $32 6*10= $60 2*5=$10 4*5=$20 6*5=$30 (10/10)*100= 100 (32/20)*100= 160 (60/30)*100= 200

As we that the Nominal GDP is considered as the GDP at current prices.

And Real GDP is considered as the GDP at base prices on the base year.

Here, the first year is considered as the base year.

So,

GDP Deflator = NominalGDP/Real GDP* 100

Percentage growth rate of real GDP from year 2 to year 3 is = (30-20/20)*100 = 50%.

Inflation rate as measured by the GDP deflator from year 2 to year 3 is (200-160/160)*100 = 25%.