Artica is a nation with a simple economy that produces only x goods: oranges, bi

Question

Artica is a nation with a simple economy that produces only x goods: oranges, bicycles, magazines, paper, orange juice and hats. Assume that half of all the oranges are used to pro- duce orange juice and one-third of all the paper is used to pro- duce magazines. a. Use the production and price information in the table fo ent calculate nominal GDP for 2011. b. Use the production and price information in the table to cal- culate real GDP for 2009, 2010, and 2011 using 2009 as the base year. What is the growth rate of real GDP from 2009 to 2010 and from 2010 to 2011? Use the production and price information in the table to cal- culate real GDP for 2009, 2010, and 2011 using 2010 as the base year. What is the growth rate of real GD P from 2009 to 2010 and from 2010 to 2011? S. c. 2009 2011 PRODUCT QUANTITY PRICE QUANTITY PRICE QUANTITY PRICE Oranges Bicycles Magazines Paper Orange juice Hats 180 $0.90 200 $1.00 200 30 150 630 $1.25 95.00 3.25 0.50 25 3.50 20 175 675 85.00 3.50 0.60 90.00 0.50 4.00 150 600 40 70 3.50 10.00 50 80 60 4.50 15.00 12.50 100

Explanation / Answer

Solution-

A. Nominal GDP for 2011

Nominal GDP = Quantity x Current year Price

                     = (200 x 1.25) + (30 x 95) + (150 x 3.25) + (630 x 0.50) + (60 x 4.50) + (100 x 15)

                     = 250 + 2850 + 487.5 + 315 + 270 + 1500

                     = 5672.5

NGDP for 2011 is 5672.5

B. Real GDP using 2009 as a base year

RGDP = Quantity x Base year Price

RGDP for year 2009

RGDP = (180 x 0.90) + (20 x 85) + (175 x 3.50) + (675 x 0.60) + (40 x 3.50) + (70 x 10)

          = 162 + 1700 + 612.5 + 405 + 140 + 700

          = 3719.5

RGDP for year 2009 is 3719.5

RGDP for year 2010

RGDP = (200 x 0.90) + (25 x 85) + (150 x 3.50) + (600 x 0.60) + (50 x 3.50) + (80 x 10)

          = 180 + 2125 + 525 + 360 + 175 + 800

          = 4165

RGDP for year 2010 is 4165

RGDP for year 2011

RGDP = (200 x 0.90) + (30 x 85) + (150 x 3.50) + (630 x 0.60) + (60 x 3.50) + (100 x 10)

          = 180 + 2550 + 525 + 378 + 210 + 1000

          = 4843

RGDP for year 2011 is 4843

Growth rate RGDP

Growth rate of RGDP between 2009 and 2010

Growth rate = (Current RGDP - Previous RGDP) / (previous RGDP) x 100

                  = (4165 - 3719.5) / (3719.5) x 100

                  = 12%

Growth rate between 2010 and 2011

Growth rate = (4843 - 4165) / (4165) x 100

                 = 16.2%

C. RGDP using 2010 as a base year

RGDP for year 2009

RGDP = (180 x 1) + (20 x 90) + (175 x 3.50) + (675 x 0.50) + (40 x 4) + (70 x 12.50)

          = 180 + 1800 + 612.5 + 337.5 + 160 + 875

          = 3965

RGDP for 2009 is 3965

RGDP for year 2010

RGDP = (200 x 1) + (25 x 90) + (150 x 3.50) + (600 x 0.50) + (50 x 4) + (80 x 12.50)

          = 200 + 2250 + 525 + 300 + 200 + 1000

          = 4475

RGDP for 2010 is 4475

RGDP for year 2011

RGDP = (200 x 1) + (30 x 90) + (150 x 3.50) + (630 x 0.50) + (60 x 4) + (100 x 12.50)

          = 200 + 2700 + 525 + 315 + 240 + 1250

          = 5230

RGDP for 2011 is 5230

Growth rate

Growth rate between 2009 and 2010

Growth rate = (4475 - 3965) / (3965) x 100

                  = 12.9%

Growth rate between 2010 and 2011

Growth rate = (5230- 4475) / (4475) x 100

                  = 16.9%

                  =

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.