1. Find the growth rate of nominal GDP for 2019. Find the growth rate of real GDP for 2019. Why are they different? In which year is the share of nominal consumption over Nominal GDP the largest? (Show how you reach this conclusion) In which year is the share of real consumption over Real GDP the largest? (Show how you reach this conclusion) Compute the inflation rate using the GDP Deflator (2016 is the base year) for 2018.
1. Find the growth rate of nominal GDP for 2019. Find the growth rate of real GDP for 2019. Why are they different? In which year is the share of nominal consumption over Nominal GDP the largest? (Show how you reach this conclusion) In which year is the share of real consumption over Real GDP the largest? (Show how you reach this conclusion) Compute the inflation rate using the GDP Deflator (2016 is the base year) for 2018.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
1.
- Find the growth rate of nominal
GDP for 2019. - Find the growth rate of real GDP for 2019. Why are they different?
- In which year is the share of nominal consumption over Nominal GDP the largest? (Show how you reach this conclusion)
- In which year is the share of real consumption over Real GDP the largest? (Show how you reach this conclusion)
- Compute the inflation rate using the GDP Deflator (2016 is the base year) for 2018.
Expert Solution
Step 1
Nominal GDP is Gross Domestic Product (GDP) less the effect of inflation. A country's real GDP is its GDP adjusted for inflation. A country's nominal GDP is represented in current year prices for goods and services, whereas real GDP is measured over a base year.
In order to calculate inflation, the GDP deflator, also known as the implicit price deflator, is utilized. It is used to determine a country's annual pricing levels for newly generated domestically manufactured final goods and services.
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