Pearson eText Macroeconomics -- Access Card
7th Edition
ISBN: 9780136850014
Author: Hubbard, Glenn, O'Brien, Anthony
Publisher: PEARSON
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Question
Chapter 8, Problem 8.7RDE
Subpart (a):
To determine
Nominal GDP and
Subpart (b):
To determine
The real GDP.
Subpart (c):
To determine
The real growth rate.
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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 half of all sugar cane is used to produce rum, and one-fifth of all the peanuts are used to produce peanut butter. Use the production and price information in the table to calculate real GDP for 2013, 2014, and 2015 using 2014 as the base year. What is the growth rate of real GDP from 2013 to 2014 and from 2014 to 2015?
Suppose an economy that produces and consumes apples, bread, and toy-cars. In the
following table are data for two different years.
2019 2020
Good Quantity Price Quantity Price
Apples 50 Rs.50 60 Rs.60
Bread 200 Rs. 20 180 Rs.25
Cars 25 Rs. 100 30 Rs.140
a. Using 2019 as the base year, compute the following statistics for 2019 and 2020 in the table
given below:
Statistics 2018 2019
GROSS DOMESTIC PRODUCT
Nominal GDP
Real GDP
GROWTH RATE
Growth Rate of Nominal GDP
Growth Rate of Real GDP
PRICE INDICES
GDP deflator
Inflation rate using GDP deflator -
CPI (a fixed-weight price index)
Inflation rate using CPI
b. How much did the cost of living rise between 2018 and 2019? Compare the answers given by
GDP deflator and CPI. Explain the difference.
c. Explain which price index (GDP deflator or CPI) should be used to adjust the salaries,
budget or spending to counterbalance the changes in the cost of living? Why?
Why the use real GDP is preferred by economists over nominal GDP to gauge economic well-being?
Consider the following data on the Pakistan economy:
Nominal GDP GDP Deflator
Year (in billions of rupees) (base year 2012)
2018 21,501 111.4
1998 9,163 76.3
a) What was the growth rate of nominal GDP between 1998 and 2018? (Hint: The growth rate of a variable X over an N-year period is calculated as [(Xfinal/Xinitial)1/N – 1] x 100). b) What was the growth rate of the GDP deflator between 1998 and 2018?
What was real GDP in 1998 measured in 2012 prices? a) What was real GDP in 2018 measured in 2012 prices? b) What was the growth rate of real GDP between 1998 and 2018? c) Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.
Chapter 8 Solutions
Pearson eText Macroeconomics -- Access Card
Ch. 8 - Prob. 8.1.1RQCh. 8 - Prob. 8.1.3RQCh. 8 - Prob. 8.1.4RQCh. 8 - Prob. 8.1.5RQCh. 8 - Prob. 8.1.6PACh. 8 - Prob. 8.1.7PACh. 8 - Prob. 8.1.8PACh. 8 - Prob. 8.1.9PACh. 8 - Prob. 8.1.10PACh. 8 - Prob. 8.1.11PA
Ch. 8 - Prob. 8.1.14PACh. 8 - Prob. 8.2.1RQCh. 8 - Prob. 8.2.2RQCh. 8 - Prob. 8.2.3RQCh. 8 - Prob. 8.2.4PACh. 8 - Prob. 8.2.9PACh. 8 - Prob. 8.2.10PACh. 8 - Prob. 8.3.1RQCh. 8 - Prob. 8.3.2RQCh. 8 - Prob. 8.3.3RQCh. 8 - Prob. 8.3.4PACh. 8 - Prob. 8.3.5PACh. 8 - Prob. 8.3.6PACh. 8 - Prob. 8.3.7PACh. 8 - Prob. 8.3.8PACh. 8 - Prob. 8.3.9PACh. 8 - Prob. 8.3.10PACh. 8 - Prob. 8.4.1RQCh. 8 - Prob. 8.4.3RQCh. 8 - Prob. 8.4.4PACh. 8 - Prob. 8.4.6PACh. 8 - Prob. 8.4.7PACh. 8 - Briefly discuss the accuracy of the following...Ch. 8 - Prob. 8.1RDECh. 8 - Prob. 8.2RDECh. 8 - Prob. 8.6RDECh. 8 - Prob. 8.7RDE
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