Question 11 44 pts Assume that an economy produces only three goods; Computers, cars, and pizza. Table 1 gives the price and quantity for each good and the number of employed and unemployed individuals for the years 2017-2020. Table 2 gives the fixed basket used for calculating the CPI. Assume that the base year is 2018! Table 1 - Price and Quantity of Goods Sold in 2017-2020 2017 2018 2019 2020 Р Q 20 Q 15 Computers Р $400/unit $18,000/unit $10/unit Р $450/unit $22,000/unit $12/unit Q P 20 $350/unit 10 $28,000/unit 550 $15/unit $500/unit $20,000/unit $10/unit O 25 12 Cars 10 12 Pizza 500 600 500 Table 2 - Fixed Basket for CPI Cars Pizza Computers 2.2 13 54 A) Compute nominal GDP for each year (assume that this is all final consumption and there are no intermediate goods). Nominal GDP 2017 - Nominal GDP 2018 Nominal GDP 2019 - Nominal GDP 2020 B) Compute real GDP for each year using 2018 as the base year. Real GDP 2017 - Real GDP 2018 - Real GDP 2019- Real GDP 2020 C) Compute the GDP deflator for each
Answer A :
Nominal GDP in 2017 = $(400 × 20 + 18,000 × 10 + 10 × 500) = $ 193,000
Nominal GDP in 2018 = $(500 × 15 + 20,000 × 12 + 10 × 600) = $ 253,500
Nominal GDP in 2019 = $(450 × 20 + 22,000 × 10 + 12 × 550) = $ 235,600
Nominal GDP in 2020 = $(350 × 25 + 28,000 × 12 + 15 × 500) = $ 352,250
Answer B : 2018 is taken as the base year. So 2018 prices will be taken as given.
Real GDP in 2017 = $(500 × 20 + 20,000 × 10 + 10 × 500) = $215,000
Real GDP in 2018 = $ 253,500
Real GDP in 2019 = $(500 × 20 + 20,000 × 10 + 10 × 550) = $215,500
Real GDP in 2020 = $(500 × 25 + 20,000 × 12 + 10 × 500) = $257,500
Answer C :
We use the formula : GDP Deflator = (Nominal GDP / Real GDP) × 100
GDP Deflator 2017 = (193,000/215,000) × 100 = 89.767
GDP Deflator 2018 = (253,500/253,500)×100 = 100
GDP Deflator 2019 = (235,600/215,500)×100 = 109.327
GDP Deflator 2020 = (352,250/257,500)×100 = 136.796
Answer D :
We use the formula : Inflation rate = [(GDP Deflator in year 2 - GDP Deflator in year 1)/GDP Deflator in Year 1] × 100%
Inflation rate in 2018 = [(100 - 89.767)/89.767]×100% = 11.4%
Inflation rate in 2019 = [(109.281 - 100)/100]×100% = 9.281%
Inflation rate in 2020 = [(136.796 - 109.281]/109.281]×100% = 25.178 %
Chegg guidelines requires us to answer only the first four subparts of a question. Kindly post the other subparts as separate questions for them to be answered.
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