Question

Suppose we are looking at an economy that produces only toys. In 2014 the country’s toy...

Suppose we are looking at an economy that produces only toys. In 2014 the country’s toy factories produced 10 million toys, which it sold on the international market for $12 per toy. In 2015 the country produced 12 million toys, which it sold for $14 per toy.

Instruction: Enter your responses as whole numbers.

a) The percentage increase in the production of toys from 2014 to 2015 was ? %.

b) What was the gross domestic product of this economy in 2014? What was the gross domestic product in 2015? (Remember that GDP is the monetary value of the economy’s output, valued at the market price.)

GDP in 2014: ? million

GDP in 2015: ? million

c) The percentage increase in nominal GDP from 2014 to 2015 was ? %.

d) Assume that the rate of inflation was equal to the rate of change of the price of toys. The growth rate of the economy from 2014 to 2015 was ?%.

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Answer #1

Q-A :: ANSWER :: 20%

=> The percentage increase in the production of toys from 2014 to 2015

= Production Difference of 2014 To 2015 * 100/2014 Production

= (12-10) * 100/10

= 2 *100 / 10

= 20 %

Q - B :: ANSWER

=> Gross Domestic Product of Economy in 2014

GDP = Total Production * Market Price

= 10 Million * $12

= 120 Million

=> Gross Domestic Product of Economy in 2015

GDP = Total Production * Market Price

= 12 Million * $14

= 168 Million

Q-C :: ANSWER :: 40%

=> The Percentage Increase in Nominal GDP From 2014 to 2015 ::

M = Million

= Difference * 100 / 2014 GDP

= (168 M- 120 M) * 100/120 M

= 40 %

Q-D :: ANSWER ::

=> Rate Of Inflation :: (Change In Price)

=  Price Difference * 100 / 2014 Price

= (14 - 12 )*100/12

= 16,67 %

=>The Growth Rate of the Economy From 2014 to 2015 ::

= Nominal GDP Increase - Inflation Rate

= 40 % - 16.67%

= 23.33%

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