34. End-of-Chapter, Problems and Applications Q6 Consider the following data on

Question

34. End-of-Chapter, Problems and Applications Q6 Consider the following data on U.S. GDP: Year 2012 2002 Nominal GDP (Billions of dollars) 15,676 10,642 GDP Deflator (Base year 2005) 115.4 92.2 The growth rate of nominal GDP between 2002 and 2012 was ,and the growth rate of the GDP deflator between 2002 and 2012 was (Hint: The growth rate of a variable X over an N-year period is calculated as 100 x Measured in 2005 prices, real GDP was ? in 2002 and in 2012. The growth rate of real GDP between 2002 and 2012 was he growth rate of nominal GDP between 2002 and 2012 wasthan the growth rate of real GDP Grade It Now Save & Continue Continue without saving

Explanation / Answer

Year

Nominal GDP

GDP Deflator

Real GDP

2012

15,676

115.4

13,584

2002

10,642

92.2

11,542

Real GDP = Nominal GDP / GDP Deflator * 100

Growth Rate of Nominal GDP = 15,676 – 10,642 / 10,642 *100 = 47.3%

Growth Rate of GDP Deflator = (115.4/92.2) (1/10) – 1 * 100 = 2.27%

Real GDP

Year

Real GDP

2012

13,584

2002

11,542

Growth Rate of Real GDP = 13,584 – 11,542/11,542 * 100 = 17.69%

The growth rate of nominal GDP between 2002 and 2012 was greater than the growth rate of real GDP.

Year

Nominal GDP

GDP Deflator

Real GDP

2012

15,676

115.4

13,584

2002

10,642

92.2

11,542

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