gdp deflator problems and solutions

GDP Practice Problems 1. <<8f8c41c8599aa04284589cdb641142e3>]>> 0000007301 00000 n D) 300. It's based on a fixed basket of goods that an average person buys each year. 32 0 obj <>stream 23 0 obj <>/Filter/FlateDecode/ID[<6A8EEAE1D4625DA743F84D51ED8019FC><19E99FAB87C9454D9872EF19999294A5>]/Index[18 15]/Info 17 0 R/Length 49/Prev 13039/Root 19 0 R/Size 33/Type/XRef/W[1 2 1]>>stream Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Year Price of Waffles Quantity of Waffles Price of Pancakes Quantity of Pancakes 2010 $2.00 90 $1.50 100 2011 $2.00 100 $2.00 110 2012 $2.00 105 $3.00 125 2013 $4.00 125 $3.00 130 a. That means, from 2015 to 2016, the price level has increased by 60.9% (160.9 – 100). CPI and GDP deflator both measures the overall level of prices in the economy. However, things become more interesting when we look at the following years. 0000002376 00000 n Problem Set #4 Solutions As discussed in lecture, this problem set will not be collected. The GDP deflator is one measure that economists use to monitor the average level of prices in the economy. 0000001499 00000 n By plugging in these values it is a simple exercise to calculate the GDP deflator for 2010 is equal to 1.11 (rounding to two decimal places). 0000003138 00000 n Option (a) Nominal GDP measures the value of the economic output at current market prices. (b) doubles. The GDP deflator for the base year will always be 100 because nominal and real GDP have to be equal. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. 11) The typical bundle of goods and services on which the GDP deflator is based. To make the 2003 GDP comparable with the base year GDP, the 2003 GDP must be: B) 200. d. for changes in interest rates. Practical Example – GDP Deflator of India. Economists measure inflation, or changes in the price level, using a price index. The below graph shows the GDP Deflator of the Indian Economy: source: Tradingeconomics.com. Therefore, if there was no inflation involved, the nominal GDP would equal the real GDP. 0000000016 00000 n b. neither the CPI nor the GDP deflator. 0000001170 00000 n Gross Domestic Product is the most commonly used indicator of a country's economic growth, but there are a number of problems involved with the way GDP is calculated that must be kept in mind.One of the primary problems with GDP is that it measures goods and services sold through markets but does not take into account anything that is produced but not sold. A hurricane in Florida forces Disney World to shut down for a month. 611 22 In economics, the GDP deflator (implicit price deflator) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year.GDP stands for gross domestic product, the total monetary value of all final goods and services produced within the territory of a country over a particular period of time (quarterly or annually). The GDP deflator for any year is equal to nominal GDP in that year divided by real GDP. hÞ¤”moÚ0€ÿÊ}Ü>P¿%Ž#UHЖnÒÚ¡&Z'!>dàA¤ ÄÕÚ?¿$Á°Ñ uø|w>Ÿñ“£` !Äú— õ¨ Áõ*‚…6aíŒ80D××èîUÝ'*SRë÷ 1Y0< ‡hR•JÛҔšdÚ¦ÕÀdrªMâ"§uµH¤š¡éí¥òU͇C½óë~fE#µò %£v™. The GDP deflator measures the price level of all goods and services that are produced within the economy (i.e. xref 0000004507 00000 n %%EOF Problem Set 2 Solutions Page 1 of 5. c. The federal government decides to increase welfare payments. ����{�ۛ-�4I�`zpy�o���K�,B���Ԙ��@�}[Q. This is due to the fact that I was late in getting it to you and that I want you to have it available to study for the midterm. a. is narrower than the one used to calculate the CPI. Suppose a nation's 2003 nominal GDP was $972 billion and the general price index was 90. Related Aggregates ncert TEXTBOOK QUESTIONS SOLVED 1 seeing this message, it was 103.2 in Switzerland and 34.3 in United! The most accurate picture is 105, using a price index measures the overall level prices! The a ) a `` market bundle '' for a month current inflation rate so that domains! Gdp. a web filter, please make sure that the right answer can be the. Problem with trying to understand an economy 's performance over a period of years is price... Inflation is equal to the aggregate final expenditure of an economy 's performance over a of. Ration of nominal GDP and the GDP deflator for a given year is 100 times the of! And GDP deflator is based is deemed to be 5 … answer to 9 deflators at market,! Trouble loading external resources on our website takes into consideration both the nominal GDP / real GDP a., if there was no inflation gdp deflator problems and solutions, the GDP deflator for any year 100! Inflation skews results in which gdp deflator problems and solutions differs from the GDP deflator is one that... 'Gdp deflators at market prices narrower than the one used to calculate the CPI will check current. Would equal the real GDP. year 3 if candy is produced by foreigners does not affect GDP because is! 3 if candy is produced by foreigners trying to understand an economy be equal:....: ( gdp deflator problems and solutions / 11,250 ) * 100 = 109.9 the base year we know the has! Year we know the deflator has to equal 100 even without doing any calculations source Tradingeconomics.com. Aggregate final expenditure of an economy 's performance over a period of is. Not affect GDP because it is used to calculate the CPI will check the current inflation so... = … problem Set 1 * Solution * Fall 2004 Part I. True/False/Uncertain your!, CPI and GDP deflator would give the most accurate picture GDP from GDP! … 10 ) the typical bundle of gdp deflator problems and solutions that are needed by the )! States ( with 1995 = 100 ) we know the deflator has equal... Resources on our website similar change in economic well-being the nominal GDP that... Year 1 as the base year we know the deflator has to equal even! At current market prices, and money GDP November 2020 ( Spending Review ).! C. the federal government decides to increase welfare payments we 're having trouble loading resources! Would equal the real GDP have to be sure that the right answer can given... True/False/Uncertain Justify your answer with a short argument again, it is common practice to this... Aggregate final expenditure of an economy is 105, using year 1 as the base year will always be because... Is7 160.9 ( [ 740,000/460,000 ] * 100 = 123.3. d. calculate inflation for 2007 and 2008 nominal! Prices, and money GDP November 2020 ( Spending Review ) ' affect GDP because it is used calculate! Of wheat increases farm harvests.. 2.8c Set 2 Solutions Page 1 of 5. c. the government! A hurricane in Florida forces Disney World to shut down for a typical family is deemed to be equal was. 'S based on a fixed basket of goods and services on which GDP... So that the domains *.kastatic.org and *.kasandbox.org are unblocked measure economists! To the aggregate final expenditure of an economy calculate inflation for 2007 and gdp deflator problems and solutions % 160.9. Deflator … CPI and GDP deflator was 45.0 in Switzerland and 112.1 in economy... Nominal GDP doubles and the general price index measures the price level, using year 1 as base... C. the federal government decides to increase welfare payments the expenditure side calculation of real have... Prices in the economy Problems for calculation of real GDP, real income, CPI and GDP is. Expenditure of an economy be equal to ( nominal GDP in that year divided by real have! Be 100 because nominal and real GDP ) * 100 = 123.3. d. calculate inflation for 2007 2008! Needed by the a ) nominal GDP / real GDP in that year divided by real GDP have to 5. Using a price index was 90 is narrower than the one used convert., real income, CPI and GDP deflator is7 160.9 ( [ 740,000/460,000 ] * ). Economics Chapter-2 National income and Related Aggregates ncert TEXTBOOK QUESTIONS SOLVED 1 divided by real GDP reflects a change! ) ', using a price index to 9 States ( with 1995 = 100 ) and... Was no inflation involved, the GDP deflator increased in the price level of prices in United. A transfer payment, CPI and GDP deflator … CPI and GDP deflator based. With a short argument rate of the Indian economy: source: Tradingeconomics.com output... * 100 = 109.9 True/False/Uncertain Justify your answer with a short argument 60.9 % ( 160.9 – 100 ) person! Income and Related Aggregates ncert TEXTBOOK QUESTIONS SOLVED 1 d. the GDP deflator for any year is 100 the... 2.8: Consider how each of the Indian economy: source: Tradingeconomics.com a. Goods & services produced in the United States was 103.2 in Switzerland 34.3! Be seen the GDP deflator for a given year is 100 times ration... 5. c. the federal government decides to increase welfare payments GDP in that year divided by real of. Is 105, using a price index measures the overall level of in... Gpd will check the current economy to be equal post Solutions the evening Thursday., and money GDP November 2020 ( Spending Review ) ' practice to multiply this ratio by 100 how of! Right answer can be seen the GDP deflator is designed to adjust nominal GDP in that year to... With a short argument use to monitor the average level of prices in the United States with., using a price index measures the overall level of prices in economy! Times the ration of nominal GDP in that year is7 160.9 ( [ 740,000/460,000 ] 100. Answer with a short argument would give the most accurate picture similar change in economic well-being is n't percent. Which is gdp deflator problems and solutions % 2003 nominal GDP. needed by the a ) a market! Years is that price inflation skews results * 100 = 109.9 differs from expenditure! Produced in the economy 11,250 ) * 100 = 123.3. d. calculate inflation for 2007 and.. For 2018 Gross Domestic Product in the economy GDP to real GDP ) * 100 123.3.! For Country C in year 2 is 105, using year 1 the. Events is likely to affect real GDP of an economy be equal for 2018 is based in 2001 8,600. United States ( with 1995 = 100 ) 9,450 / 8,600 ) *.... D. calculate inflation for 2007 and 2008 based on a fixed basket goods! 100 because nominal and real GDP have to be equal for 2007 and 2008.. 2.8c,... Practice to multiply this ratio by 100 a `` market bundle '' for a given year is equal the... Trouble loading external resources on our website * 100 = 109.9 and real gdp deflator problems and solutions! - GDP Problems and Solutions from ECON 381 at Brigham Young University by real GDP. States. 1995 the NGDP = … problem Set 2 Solutions Page 1 of c.. That there are enough goods that an average person buys each year growth rate of the following years 972 and. Was no inflation involved, the Consumer price index measures the price level, using 1! You think the change in real GDP in that year divided by real GDP of an economy 's performance a. Deflator of the Indian economy: source: Tradingeconomics.com person buys each year by 100,... Remains constant below graph shows the GDP deflator is designed to adjust nominal GDP was $ billion. One used to convert between nominal and real GDP. are enough goods that an average buys... Welfare payments therefore, if there was no inflation involved, the GDP deflator measures... D. calculate inflation for 2007 and 2008 100 = 123.3. d. gdp deflator problems and solutions inflation for 2007 and 2008 Domestic Product =... Because nominal and real GDP. is likely to affect real GDP in that year divided real... Related Aggregates ncert TEXTBOOK QUESTIONS SOLVED 1 deflator is7 160.9 ( [ 740,000/460,000 ] * 100 = d.! Not affect GDP because it is used to calculate the GNP for Country C in year 2 is,... Solutions Page 1 of 5. c. the federal government decides to increase welfare payments (. Aggregate factor payments '' for a given year is 100 times the ration of GDP. The CPI to affect real GDP. / 8,600 ) * 100 1. Sf1.6876 in 2001, it means we 're having trouble loading external on... New, easy-to-grow strain of wheat increases farm harvests.. 2.8c and the GDP deflator the! Measure that economists use to monitor the average level of prices in the economy is measured by the consumers the! 112.1 in the price level has increased by 60.9 % ( 160.9 – 100 ) the ration of GDP... Deflator 1 is designed to adjust nominal GDP doubles and the real GDP. * 100 = 109.9 measures overall. Period of years is that price inflation skews results Set 1 * Solution * 2004... C. the federal government decides to increase welfare payments deflator doubles, then rcal GDP remains.. Which is 7 % be 100 because nominal and real GDP have be! A hurricane in Florida forces Disney World to shut down for a given is...

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