Question

Question 9 2 pts Suppose there is a very small country called Micro-opolis. It makes only two goods: cell phones and pears. Their prices and quantities are the following: Price of pears Quantity of pears Price of cell phones Quantity of cell phones 2019 $2 100 $200 100 2020 $2.50 110 $225 110 2021 $3 148.5 $250 148.5 If 2019 is the base year, what is the growth in real GDP from 2020 to 2021? 9.1% 31.8% 35% 45% Not enough information

Answer 1

9.

We know that GDP is the value of all final goods produced in a country in a year.

So, for Micro-opolis,

GDP = Price of Pears x Quantity of pears + Price of cell phones x Quantity of cell phones

Since, we need to calculate real GDP, we'll fix the prices of both goods as per prices in 2019.

Price of pears in 2019 = $2

Price of cell phones = $200

Real GDP in year 2020 = $2 x 110 + $200 x 110 = $220 + $22,000 = $22,220

Real GDP in year 2021 = $2 x 148.5 + $200 x 148.5 = $297 + $29,700 = $29,997

Growth in real GDP from 2020 to 2021 = [(Real GDP in year 2021) - (Real GDP in year 2020)]*100/ (Real GDP in year 2020)

=$\frac{[(29,997 - 22,220)]*100}{22,220}$

=$\frac{[(7,777)]*100}{22,220}$

= 35%

Ans. 35%