Question

Problem Set 1 EC 202, Winter 2020 University of Oregon points total) Below is a schedule for the prices and quantities produced for food, energy, and smithore-the only three goods produced on the planet Irata-in 2018 and 2019. Prices (in $) Quantities 2019 2019 2018 2018 31 27 18 food 20 34 35 15 14 energy smithore 48 54 12 Fill in the table below, calculating the total GDP for Irata for 2018 and 2019, in both 2018 prices and 2019 prices. a. Using 2019 prices... Using 2018 prices... ...and 2019 quantities ...and 2018 ...and 2019 ...and 2018 quantities quantities quantities 486 620 558 476 576 1610 540 food 525 486 155L 510 432 u90 648 1624 energy smithore 1562 total GDP All of the remaining parts of this question involve using the numbers in the last row of the table filled out in part a). Calculate the growth rate of nominal GDP from 2018 to 2019. b. Show your work. Express your answer as a percentage and round to one decimal place. [Hint: which cells in the last row give the nominal GDP of 2018 and the nominal GDP of 201921 NBDP grewith. grewith = NODPP 2019 -NGDP 2018 1624 1562 1562 NGDP 2018 = 3.9 %3D nominal GDP growth rate from 2018 to 2019 3.9 Calculate the growth rate of real GDP between the two years using 2018 prices as the fixed prices. C. Show your work. Express your answer as a percentage and round to one decimal place. (Hint: which two cells in the last row were calculated using 2018 prices? 1624 NGOP 2a18 100 1551 RGDP 2018 real GDP growth rate using 2018 prices Page 2 of 6

Answer 1

1.

a)

	Using 2018 prices	Using 2018 prices	Using 2019 prices	Using 2019 prices
	2018 quantities	2019 quantities	2018 quantities	2019 quantities
	1	2	3	4
food	20*27	18*27	20*31	18*31
energy	15*35	14*35	15*34	14*34
smithore	9*54	12*54	9*48	12*48
GDP	1551	1624	1562	1610

b)

Nominal GDP = Current year quantity * Current year prices

Nominal GDP growth rate = [ GDP 2019 (Col 4) - GDP 2018 (Col 1) ] / GDP 2018 (Col 1) = 1610-1551/1551 = 0.038

Therefore, growth rate is 3.8% (0.038*100)

c)

Real GDP = Current year quantity * Base year prices

Here, base year is 2018. So we use col 1 and 2

Growth rate = [ GDP 2019 (Col 2) - GDP 2018 (Col 1) ] / GDP 2018 (Col 1) = 1624-1551/1551 = 0.047

Therefore, growth rate is 4.7%

d)

Real GDP = Current year quantity * Base year prices

Here, base year is 2019. So we use col 3 and 4

Growth rate = [ GDP 2019 (Col 4) - GDP 2018 (Col 3) ] / GDP 2018 (Col 3) = 1610-1562/1562 = 0.0307

Therefore, growth rate is 3.07% or 3.1%