1. Below you will find nominal GOP and the GDP deflator (based on 2009-100) for
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1. Below you will find nominal GOP and the GDP deflator (based on 2009-100) for the years 1992, 2002, and 2012 GDP Statistics Nominal GDP Real GDP GDP deflator 1992 6,539 2002 10,980 2012 16,245 70.6 85.1 105.0 a. 9 points) Compute real GDP for each year b. 10points) Compute the percentage change in nominal and real GDP from 1992 to 2002, and from 2002 to 2012 c. 5 points) Compute the percentage change in the GDP deflator over these two periods. 2. Use the data to compute the Price Index for 2013 u the base 1983 = 100. Item per Month in 1983 1983 2013 Button-down shirts $10 Sneakers Textbooks eans Restaurant meals 5 25 10 12 12 35 40 30 12 Hint: you will need to set up a table that loaks like this. a. Fll in the missing pieces (14 points) Expenditure, Price in Quantity in Expenditure in Price in 2013 prices on 1983 1983 1983 quant 2013 25 Item 1983 Sneakers Textbooks eans Meals Total 25 10 12 12 35 12 Spring 2018 AGEC 2103 J. Popp cannot be shared without written permission Page 1 b. (5 points) Then calculate CP. What is it?Explanation / Answer
a. Real GDP is the value of final output produced by an economy which is adjusted for inflation. In this case, the real GDP needs to be adjusted against nominal GDP using the GDP deflator. This implies:
Real GDP = Nominal GDP× GDP deflator in base year/GDP deflator in current year
Thus, Real GDP for 1992 is (6539× 100/70.6) or $9,262 . Similarly, Real GDP for 2002 is 10,980× 100/85.1 or $12,902. Real GDP for 2012 is 16,245 × 100/105 or $15,471.
b. Real GDP changes from $9,262 in 1992 to $12,902 in 2002. Hence, it changed by 39.3 percent .Real GDP changes from $12,902 in 2002 to $15,471 in 2012. Hence, it changed by 19.9 percent.
Nominal GDP rose by 67.9 percent from 1992 to 2002 and by 47.0 percent during 2002 to 2012.
c. The percent change in GDP deflator is 21 percent from 1992 to 2002 and 23 percent during 2002 to 2012.
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