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1- Consider the following economy: Prices and Quantities Year Price Good 1 Quant

ID: 1169698 • Letter: 1

Question

1- Consider the following economy:

Prices and Quantities

Year

Price Good 1

Quantity

Price Good 2

Q2 (1000)

2010

$3

105

$4

50

2011

$4

115

$5

65

2012

$4.50

120

$7

60

2013

$6.50

125

$8

70

Calculate the Nominal GDP for each year

Calculate the real GDP for each year using 2010 as the base year.

Calculate the GDP deflator for each year.

Year

Nominal GDP

Real GDP

GDP Deflator

2010

2011

2012

2013

2- Calculate the GDP

3- What is the GDP deflator if real GDP = 3450?

Items

Nominal

Real

Personal Consumption expenditures

C

$4000

Gross Private domestic Investments

I

$1500

Gov. Purchases of goods and services

G

$1000

Exports

X

$1000

Imports

M

Net Exports

NX

-2500

Note that NX = net exports= exports - imports

Prices and Quantities

Year

Price Good 1

Quantity

Price Good 2

Q2 (1000)

2010

$3

105

$4

50

2011

$4

115

$5

65

2012

$4.50

120

$7

60

2013

$6.50

125

$8

70

Explanation / Answer

Year Nominal GDP Real GDP GDP Deflator 2010 515000 515000 Nil 2011 785000 605000 129.75 2012 960000 600000 160.00 2013 1372500 655000 209.54 Items Amount Consumption 4000 Investment 1500 Government Spending 1000 Net Exports -2500 Nominal GDP 4000 Real GDP 3450 Deflator 115.94