Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
Question
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Chapter 8, Problem 14CQ

(a)

To determine

Identify the 2013 and 2014 real GDP.

(a)

Expert Solution
Check Mark

Explanation of Solution

Table-1 shows the value of nominal GDP and the GDP deflator as follows:

Table-1
 

Nominal GDP

(Billions of currency)

GDP deflator

(2010=100)

Country2013201420132014
U16,663.217,348.1105.6107.4
C1,879.51,976.2108.1110.9
J482,430489,62397.298.8
I1,609.51,616.3103.9105
A1,554.81,599.8105.5105.8
UK1,713.11,791.5104.3106

The real GDP can be calculated using the formula as follows:

Real GDP=Nominal GDPGDP deflator×100        (1)

Use Equation-1 to calculate the real GDP of Country U in 2013 as follows:

Real GDP=16,663.20105.6×100=15,779.54

Therefore, the real GDP of Country U in 2013 is $15,779.54 billion.

Table-2 shows the value of the real GDP in 2013 and 2014, which is calculated using Equation-1 as follows:

Table-2
 Nominal GDPGDP deflatorReal GDP
Country201320142013201420132014
U16,663.217,348.1105.6107.415,779.516,152.8
C1,879.51,976.2108.1110.91,738.671,781.97
J482,430489,62397.298.8496,327495,570
I1,609.51,616.3103.91051,549.091,539.33
A1,554.81,599.8105.5105.81,473.741,512.10
UK1,713.11,791.5104.31061,642.471,690.09

(b)

To determine

Identify the inflation rate in 2014.

(b)

Expert Solution
Check Mark

Explanation of Solution

The inflation rate in 2014 can be calculated using the formula as follows:

Inflation rate=(GDP deflatorCurrent yearGDP deflatorBase yearGDP deflatorBase year)×100        (2)

Use Equation-2 to calculate the inflation rate of Country U in 2014 as follows:

Inflation rate=(107.4105.6105.6)×100=1.70

Therefore, the inflation rate is 1.70%.

Table-3 shows the value of the inflation rate, which is calculated using Equation-2 as follows:

Table-3
 Nominal GDPGDP deflatorReal GDPInflation rate
Country2013201420132014201320142014
U16,663.217,348.1105.6107.415,779.516,152.81.70%
C1,879.51,976.2108.1110.91,738.671,781.972.59%
J482,430489,62397.298.8496,327495,5701.65%
I1,609.51,616.3103.91051,549.091,539.331.06%
A1,554.81,599.8105.5105.81,473.741,512.10.28%
UK1,713.11,791.5104.31061,642.471,690.091.63%

(c)

To determine

Identify the country that has the highest growth rate of real GDP.

(c)

Expert Solution
Check Mark

Explanation of Solution

The growth rate can be calculated using the formula as follows:

Growth rate=(Real GDPCurrent yearRealGDPBase yearRealGDPBase year)×100        (3)

Use Equatrion-3 to calculate the growth rate of real GDP as follows:

Growth rate=(16,152.815,779.515,779.5)×100=0.02365×100=2.36

Therefore, the growth rate of real GDP is 2.36%.

Table-4 shows the growth rate in 2014, which is calculated using the Equation-3 as follows:

Table-4
 Nominal GDPGDP deflatorReal GDPInflation rateGrowth rate
Country20132014201320142013201420142014
U16,663.217,348.1105.6107.415,779.516,152.81.70%2.37%
C1,879.51,976.2108.1110.91,738.671,781.972.59%2.49%
J482,430489,62397.298.8496,327495,5701.65%-0.15%
I1,609.51,616.3103.91051,549.091,539.331.06%-0.63%
A1,554.81,599.8105.5105.81,473.741,512.10.28%2.60%
UK1,713.11,791.5104.31061,642.471,690.091.63%2.90%

According to Table-4, Country UK has the highest growth rate of real GDP, which is 2.90% and Country J has the lowest growth rate of real GDP, which is -0.15%.

(d)

To determine

Identify the countries that have the highest and lowest inflation rate.

(d)

Expert Solution
Check Mark

Explanation of Solution

According to Table-3, Country C has the highest inflation rate, which is 2.59% and Country A has the lowest inflation rate, which is 0.28%.

(e)

To determine

Identify the country that has the most inflation

(e)

Expert Solution
Check Mark

Explanation of Solution

According to the data from Table-4, Country C has the highest inflation rate, which is 2.59%. Therefore, Country C has the most inflation during 2014.

Economics Concept Introduction

Inflation: Inflation is a sustained rise in the price level of a selected basket of goods and service for a particular period.

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