Download Practicing Calculations with GDP (Deflator, etc)

Practicing Calculations with GDP ANSWERS!!!
1. Using the following figures (which represent one economy for one year), calculate GDP
using the expenditure approach. (Show your work!)
1. Consumer expenditures = $600 billion
2. Business spending on capital goods = $150 billion
3. Government expenditures = $200 billion
4. Imports = $75 billion
5. Exports = $65 billion
6. Transfer payments (foreign aid, membership dues to IMF/UN/etc.) = $50 billion
7. Depreciation of capital goods = $25 billion
8. Income earned abroad and sent back to this country = $15 billion
9. Income earned in this country and sent to other countries = $10 billion
C + I + G + (X-M). 600 +150+200+65-75 = $940 billion
2. Does the above number represent nominal or real GDP? Why?
NOMINAL. Not adjusted for inflation
3. Calculate GNP/GNI using the same numbers from above. Show your work.
GNP/GNI = GDP + income from abroad – income sent abroad
GNP/GNI = 940 + 15 – 10 = $945
4. Using the chart below, calculate the nominal GDP for 2015 in this economy.
940 (900 + 40)
5. Using the chart below, calculate the nominal GDP for 2016 in this economy.
1430 (1350 + 80)
6. If year 2015 is the base year, what is the real GDP for 2015 in this economy? Why?
940 b/c in the base year, nominal & real are the same
GOODS
Economics
textbooks
Economics
workbooks
2015 Quantity
90
40
2015 Price
$10/unit
$1/unit
2016 Quantity
90
40
2016 Price
$15/unit
$2/unit
7. Write the equation for calculating real GDP.
Real GDP = Nominal GDP/GDP deflator X 100
8. Calculate the real GDP for this economy in 2016. The base year is 2015. (***Remem.:
rGDP is a measure of output valued at constant (unchanging) prices!***)
940 (90 X10; 40 X1). Output didn’t change, only price!
9. Write the equation for GDP deflator:
GDP Deflator = Nominal GDP/Real GDP X 100
10. Calculate the GDP deflator for this economy in 2015 and 2016.
GDP Deflator in 2015 = 100. GDP Deflator in 2016 = 1.52 (1430/940 X 100)
11. Calculate real GDP for 2017 if in that year the nominal GDP becomes 1000 and the
price deflator is 200.
Real GDP = 500 (1000/200 X 100)
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12. What is the base year on the table below? 1987
is 100. Nominal GDP = Real GDP
Why do you know this? Deflator
13. Complete the table below, which shows actual data for the US economy. ABCD
Year
1960
Nominal GDP (billions)
$513.4
GDP Deflator (Price Index)
26.0
Real GDP (bil.)
1974.62
1970
1010.7
35.1
2879.49
1980
2708.0
71.7
3776.85
1987
4539.9
100.0
4539.9
1991
5724.8
117.0
4892.99
1994
6736.9
126.1
5342.51
Has this economy experienced inflation? Yes
How do you know? The GDP deflator has consistently increased.
Has this economy experienced real growth? Yes
How do you know? Real GDP continued to rise between each interval.
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More practice!!! Below are figures for a simplified economy. Calculate the price deflator,
nominal or current “GDP”, and real or constant “GDP”, using Year 2 as the base year.
Year Quantity of Goods Price Per Good
Price Deflator
Nominal GDP Real GDP
1
3
$2
50
6
12
2
5
4
100
20
20
3
6
5
125
30
24
4
8
6
150
48
32
5
9
8
200
72
36
Has this economy experienced inflation? Yes
How do you know? Price per good consistently goes up
Has this economy experienced real growth? A
How do you know? Quantity of output continued to grow; Real GDP grew
Would it make a difference in the calculations to use year 4 as a base year? Explain. Yes.
Nominal & Real GDP would continue to grow, but Real GDP would be measured differently
b/c year 4 $ is not the same as year 2 $.
****With Year 4 as base year  Nominal/Real
GDP = 48. Year 1 rGDP = 18; Year 2 rGDP = 29.85; Year 3 rGDP = 36; year 5 rGDP = 58
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