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Assignment 3

The document presents a series of economic problems related to GDP calculations, including real and nominal GDP forecasts for specific years, growth rates, and price indices. It covers various scenarios, such as calculating GDP for a small island nation producing six goods and analyzing GDP data from different years using different base years. Additionally, it explores the relationship between income and expenditure approaches to GDP in a simple economy.

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Gia Han Luu
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3 views

Assignment 3

The document presents a series of economic problems related to GDP calculations, including real and nominal GDP forecasts for specific years, growth rates, and price indices. It covers various scenarios, such as calculating GDP for a small island nation producing six goods and analyzing GDP data from different years using different base years. Additionally, it explores the relationship between income and expenditure approaches to GDP in a simple economy.

Uploaded by

Gia Han Luu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem 1:

The following table gives some figures from forecasts of real GDP (in 2009 dollars) and population
done in 2018 According to the forecasts, approximately how much real growth will there be between
2022 and 2023? What is the per-capita real GDP projected to be in 2022 and in 2023? Compute the
forecast rate of change in real GDP and per capita real GDP between 2022 and 2023.
Real GDP 2022 (billions) $18,965
Real GDP 2023 (billions) $19,269
Population 2022 (millions) 338.2
Population 2023 (millions) 340.5

Problem 2:
Gorgonzola is a small island nation with a simple economy that produces only six goods: sugar cane,
yo-yos, rum, peanuts, harmonicas, and peanut butter. Assume that one quarter of all the sugar cane is
used to produce rum and one half of all the peanuts are used to produce peanut butter.
a. Use the production and price information in the table to calculate nominal GDP for 20X3.
b. Use the production and price information in the table to calculate real GDP for 20X1, 20X2 and
20X3 using 20X1 as the base year. What is the growth rate of real GDP from 20X1 to 20X2 and
from 20X2 to 20X3?
c. Use the production and price information in the table to calculate real GDP for 20X1, 20X2, and
20X3 using 20X2 as the base year. What is the growth rate of real GDP from 20X1 to 20X2 and
from 20X2 to 20X3?
20X1 20X2 20X3
Quantity Price Quantity Price Quantity Price
Sugar cane 240 $0.80 240 $1.00 300 $1.15
Yo-yos 600 2.50 700 3.00 750 4.00
Rum 150 10.00 160 12.00 180 15.00
Peanuts 500 2.00 450 2.50 450 2.50
Harmonicas 75 25.00 75 30.00 85 30.00
Peanut butter 100 4.50 85 4.50 85 5.00

Problem 3:
The following table contains nominal and real GDP data, in billions of dollars, from the General
Statistics for 2013 and 2014. The data is listed per quarter, and the real GDP data was calculated using
2010 as the base year. Fill in the columns for the GDP deflator and for the percent increase in price
level.
Percent
Nominal GDP Real GDP GDP Deflator Increase in
Price Level
2013 q1 16,502.4 15,538.4
2013 q2 16,619.2 15,606.6
2013 q3 16,872.3 15,779.9
2013 q4 17,078.3 15,916.2
2014 q1 17,044.0 15,831.7
2014 q2 17,328.2 16,010.4
2014 q3 17,599.8 16,205.6
2014 q4 17,703.7 16,294.7

Problem 4:
Consider an economy that produces and consumes hot dogs and hamburgers. In the following table
are data for two different years.

a. Using 2010 as the base year, compute the following statistics for each year: nominal GDP, real
GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI.
b. By what percentage did prices rise between 2010 and 2015? Give the answer for each good and
also for the two measures of the overall price level. Compare the answers given by the Laspeyres
and Paasche price indexes. Explain the difference.

Problem 5:
In a simple economy, suppose that all income is either compensation of employees or profits. Suppose
also that there are no indirect taxes. Calculate gross domestic product from the following set of
numbers. Show that the expenditure approach and the income approach.
Consumption $9,500
Investment 3,000
Depreciation 1,750
Profits 2,400
Exports 850
Compensation of employees 11,500
Government purchases 3,200
Direct taxes 1,200
Saving 1,600
Imports 900

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