Question

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the prices of these items for 2015 and 2016 are shown in the table below: Year Quantities produced Price ($) 2015 Laptops =50 Books =1,000 Laptops =200 Books = ? 2016 Laptops =100 Books =? Laptops =150 Books =10

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the prices of these items for 2015 and 2016 are shown in the table below: Year 2015 Quantities produced Laptops =50 Books =1,000 Laptops -100 Books = ? Price $) Laptops =200 Books = ? Laptops = 150 Books = 10 2016 Instructions: Round your answer to two decimal places. a. Let's assume that the base year was 2015, so that real GDP in 2015 equals nominal GDP in 2015. If the real GDP in Britain was $15,000 in 2015, the price of books was Instructions: Round your answer to the nearest whole number. b. Using your answer from part (a), if the growth rate in nominal GDP was 10 percent, D b ooks must have been produced in 2016. Instructions: Round your answer to one decimal place. c. Using your answers from parts (a) and (b), the growth rate in real GDP between 2015 and 2016 was percent

Answer 1

Given nominal GDP of Britain in 2015 = $ 15,000

Note nominal GDP is equal to real GDP.

NGDP2015 = 50 x 200 + 1,000 x x

15.000 = 10,000+ 1.000 x x

1.000 x x = 15,000 – 10,000

5,000 1.000

= x = $5

Book price in year 2015 = $ 5

B. In 2016 Nominal GDP increased by 10%.

NGDP of 2016 = $ 16,500

NGDP2016 = 100 x 150+ x x 10

16.500 = 100 x 150 + 2 x 10

10x = 16.500 – 15.000

BC= 1,500 10

= x= 150

C. Real gdp of 2015 = Nominal GDP of 2015 = $ 15,000

Real GDP of 2016 = 100 × 200 + 150 × 5 = $ 20,750

Growth rate = (20,750/15,000) - 1 = 0.3833

Growth rate = 38.33%