a).
Consider the given problem here Britannica produces three goods and there price and quantity are given for different years. Now, the nominal GDP is the market value of all goods and services produce by a nation in a particular period or year. Here in 2011 Britannica produce “10.5 computers”, “105 DVD’s” and “2 Pizzas” and their respective price are “$1,000”, “$12” and “$16”. So, the nominal GDP of 2011 is “1,000*10.5+12*105+16*2 = $11,792”. Similarly, we can get the nominal GDP for 2010 and 2012, the following shows the nominal GDP for different years.
Now, the nominal GDP of 2010 and 2011 are “10,030” and “11,792”, => the % change in nominal GDP from 2010 to 2011 is [(11,792-10,030)*100/10,030]= 17.57%. Similarly the above table shows the % change in nominal GDP from 2011 to 2012.
b).
The real GDP is the market value of all goods and services produce by a nation in a particular period or year in base price. Here in 2011 Britannica produce “10.5 computers”, “105 DVD’s” and “2 Pizzas” and their respective price in base year 2010 are “$900”, “$10” and “$15”. So, the Real GDP of 2011 is “900*10.5+10*105+15*2 = $10,530”. Similarly, we can get the real GDP for 2010 and 2012, the following shows the real GDP for different years.
Now, the real GDP of 2010 and 2011 are “10,030” and “10,530”, => the % change in real GDP from 2010 to 2011 is [(10,530-10,030)*100/10,030]= 4.99%. Similarly the above table shows the % change in real GDP from 2011 to 2012.
c).
To get the aggregate price level in Laspeyres method, we have get CPI. Now, in CPI we have to fixed the bundle of goods and services. Here in 2010 the quantity of computer, DVD and pizzas are “10”, “100” and “2” respectively. So, here we will get the value of this bundle in different year with different price levels.
Here the above table shows the CPI as well as inflation for different years.
d).
To get the aggregate price level in Paasche method, we have get GDP-deflator. GDP deflator is the ratio of nominal to real GDP. The following table shows the GDP-deflator for different years.
If we compare the price index in both the method then we get that the CPI and GDP-deflator are same for 2011 but CPI is more in 2012, the one most important reasons is CPI fixe the bundle on the other hand GDP-deflator takes into account the total goods produced in different years.
5. The economy of Britannica produces three Year Computers DVDs Pizzas goods: computers, DVDs, and pizza....
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