Answer to Question #135866 in Economics of Enterprise for Hadgu

Question #135866
27. Consider an economy that produces and consumes Bread and Automobile. Data for two different years 2008 and 2011 is given in the following table.
Year 2008 2011
Price of Automobiles $15,000 $20,000
Price of a loaf of bread $5 $8
Number of automobiles produced 200 320
Number of loaves of bread produced 100,000 200,000
Using the year 2008 as a base year,
a. Calculate the nominal and real GDP of 2011.
b. Find the value of GDP Deflator for the year 2011 and interpret.
c. Calculate the inflation rate in 2011.
1
Expert's answer
2020-10-05T14:23:32-0400

Q1Q_1 Nominal GDP of 2011=price of bread(2011)×\times quantity of bread (2011)×\times Quantity of automobiles(2011)

=8×(200000+20000)×3208\times (200000+20000)\times320

=1600000+6400000=80000001600000+6400000=8000000


Real GDP 2011=For real GDP we use prices of base year , here 2008 is base year


Real GDP=Price of bread (2008)×\times quantity of bread (2011)+Price of automobiles (2008)×\times quantity of automobiles (2011)

5×(200000+15000)×3205\times (200000+15000)\times320


Real GDP in 2011= 1000000+4800000


=58000005800000



QbQ_b GDP deflator

=NominalGDPRealGDP×100\frac{Nominal GDP}{Real GDP}\times100


80000005800000×100=137.93\frac{8000000}{5800000}\times100=137.93


This means that Nominal GDP is 37.93% more than the real GDP


QcQ_c inflation rate in 2011


GDP deflator of base year=100

GDP deflator for year 2011=137.93


inflation rate is percentage change in GDP deflator

=137.93100=37.93137.93-100=37.93


=37.93100×100=37.93percent\frac{37.93}{100}\times100=37.93 percent


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Comments

Amir
29.01.23, 09:20

very nice!

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