Question

2. Consider a hypothetical economy which produces three goods: TVs, books, and hamburgers. The following table shows the prices and output of the three goods for the years 2015, 2016, and 2017. Hamburgers Quantity TVs Quantity Books Price ($) Hamburgers Price (S) TVs Year Price (S) 2015 Books Quantity 250 10 10 2 40 2016 300 20 12 6 3 60 2017 280 25 6 14 4 80 a. What is the percent change in production of each of the goods from 2015 to 2016 and from 2016 to 2017? b. What is the percent change in prices of each of the goods from 2015 to 2016 and from 2016 to 2017? c. Calculate the nominal GDP in this economy for each of the three years. What is the percent change in nominal GDP from 2015 to 2016 and from 2016 to 2017? d. Calculate the real GDP in this economy using 2015 prices for each of the three years. What is the percent change in real GDP from 2015 to 2016 and from 2016 to 2017? e. Calculate the GDP deflator in this economy using 2015 prices for each of the three years. What is the percent change in deflator from 2015 to 2016 and from 2016 to 2017?

Answer 1

2. - a % change in the production of goods from 2015 to 2016 ) % change in Tv production = (30-10 x 100 = 100% • % change in Book production = (6-5 x 100 = 20% • % change in Hamburgers production = (60 - 10 x 100 = 5.0% 40 / 20 % change in the production of goods from 2016 to 2017 % change in to production = (25-20)x100 = 25% 1. % change in Book production = (6-64100 = 0% o o% change in Hamburgens production = (80-60)+100 = 33.33% 60 250 by % change in price of each good from 2015 7 to 2016 % Change in tu price = (300 - 250 x 100 = 20% % change in Book Price = ( 12 - 10 ) x 100 = 20% % change in Hambungens price = (3-2) x 100 = 50%

% change in 2017 = price of each good from 2016 to • % change in Tv price = /280-300 x 100 = 6 300 = -6.67% 1...% change in Book price = (14-12 J x 100 = 16.67% I 12 % change in Hambungen Price = (4-3) x 100 = 33.33% CYNGOP = price in consent fear & Quantity in cur rear es 2015 NGP2015 = $1(250x10) + (10x5) +(2 x 40)] = $ 2630 M4D2016 300 x 2 + ( 12 x G + ( x C) = G 252 NGDP 2017 = $(2 80 x 25) + (1986) + ( 4×80)] = $7404 to change in NGDP from 2015 to 2016 ( $6252 - $2630) x 100 = 137.7% $2630 NGDP D o change in RGDP from 2016 to 2017 ($ 7404 - $6252) x 100 = 18.4% $ 6252

i dy RGDP = base fear price & cunnent year quantity RADP as = NGDP2015 - $ 2030 RGDP 2016 = $1(250 x 20)+ (1046) + (2x60)] = $ 5180 RGDP 2014 = $[(250 x 25) + ( 10x6) + (2 x 89)] = $6470 % Change in BGPP from 2015 to 2016 $ 5180 - $2630) x 100 = 96.96 % $2630 4 % change in RGDP Lesom 2016 to 2017 $ 6470 - $5180) X100 = 24.9 $ 5180 Les GDP de fiafon = (NGDP/RGDP ) x 100 I GDP deflator 2015 = ($26.30 / $2630) x 100 = 100 GDP deflator 2016 = ($6252/ $5180) x 100 = 1207 I GDP deflater alt = ($7404/6 64 70 ) x 100 = 114.41 % Change in GDP deflator Lesem 2015 to 2016 (12007- 100 x 100 = 20.7% - 100 % change im GDP al fiator from 2016 to 2017 ( 114.4 - 120.72 1x 100 = 12.0.7 - -5 2%