1. Below are some data on gross domestic product (GDP) in the U.S. between 2012-
ID: 1141804 • Letter: 1
Question
1. Below are some data on gross domestic product (GDP) in the U.S. between 2012-2015. Time 2012 Q4 2013 Q4 2014 Q4 2015 Q4 Real GDP per capita (chained 2009 USD) 8,797 49,749 $50,612 $51,204 (a) Calculate the rate of economic growth during 2013. (b) Calculate the rate of economic growth during 2014. (c) Calculate the rate of economic growth during 2015. 2. Use your calculations from Question 1 and The Rule of 72 to answer the following. (a) Given the 2013 economic growth rate, how many years will it take for the economy to make Americans twice as well off as they are today, on average? (b) Given the 2014 economic growth rate, how many years will it take for the economy to make Americans twice as well off as they are today, on average? (c) Given the 2015 economic growth rate, how many years will it take for the economy to make Americans twice as well off as they are today, on average? 3. Use the formula for the quantity theory of money to solve for the missing variable in each of the following examples. (a) Gross domestic product is $10,000, money demand is $5,000, and the velocity of money is 5 What is the price level? (b) Gross domestic product is $15,000, the price level is 3, and the velocity of money is 4. What is the demand for money? (e) Gross domestic product is $20,000, the price level is 2, and the demand for money is $4,000. What is the velocity of money?Explanation / Answer
Ans:
1)
Growth rate = (Present year real GDP per capita - Past year real GDP per capita ) / (Past year real GDP per capita ) * 100
a) Growth rate in 2013 = ($49,749 - $48,797) / $48,797
= $952 / $48,797
= 1.95%
b) Growth rate in 2014 = ( $50,612- $49,749) / $49,749
= $863 / $49,749
= 0.0173 or 1.73%
c) Growth rate in 2015 = ( $51,204 - $50,612) / $50,612
= $592 / $50612
= 0.0167 or 1.67%
2) Years to double = 72 / growth rate
a) With 2013 economic growth rate = 72 / 1.95
= 37 years
b) With 2014 economic growth rate = 72 / 1.73
= 42 years
c) With 2015 economic growth rate = 72 / 1.67
= 43 years
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