Question

2. The following table displays data on Italy. Prices are in trillion USD $.

year	Nominal GDP	Real GDP (in 2010 USD)	GDP deflator
2012	2.087		100
2013	2.141	2.047
2014		2.047	105.5
2015	1.836		89
2016		2.089	89.8

1.

1. Fill in the missing values

2. Calculate GDP growth between 2012 and 2013 (use real GDP). Did Italy’s GDP grow or

contract?

3. Calculate GDP growth between 2013 and 2014

4. Calculate inflation rate between 2013 and 2014

5. Between 2013 and 2014, the nominal GDP rose, but real GDP stayed the same. Why? (Hint:

think about the results from questions #3 and #4)

6. Calculate GDP growth rate between 2015 and 2016

7. Using the growth rate from question #6, calculate the future value of Italy’s GDP in 10 years.

8. How long will it take Italy’s GDP to double?

Answer 1

1.

Year Nominal GDP 2012 2013 2014 2015 2016 Real GDP GDP deflator 2.087 2.087 100 2.141 2.047 104.592086 2.159585 2.047 105.5 1.836 2.062921348 1.875922 2.089 89.8 89

2.

GDP deflator 2010=(nominal / real )*100

2.

Real GDP growth rate between 2012 and 2013

=[(real GDP 2013 - real GDP 2012)/ real GDP 2012]*100

=[(2.047-2.087)/2.087]*100

=-1.91%

Since growth rate is negative, it means real GDP contract.

3.

Real GDP growth rate between 2013 and 2014

=[(real GDP 2014 - real GDP 2013)/ real GDP 2013]*100

=[(2.047-2.047)/ 2.047]*100

=(0/2.047)*100

=0%

4.

Inflation rate between 2013 and 2014 is

=[(GDP deflator 2014 - GDP deflator 2013)/ GDP deflator 2014]*100

=[(105.5-104.592)/104.592]*100

=0.86%