Question

1. Assume the the real GDP for 2018 was $18 Trillion and that for 2019 it was $20 Trillion. What was the rate of growth between 2018 and 2019? Show how you arrived at your answer.

2. Assume you purchase $1000 worth of stock and the broker's fee is $100. Explain why your $1000 stock purchase is not included in GDP but the $100 broker's fee is included.

Answer 1

1. Rate of growth can be calculated from the % change in real GDP from 2018 to 2019. The % change in real GDP from 2018 to 2019 = (Real GDP in 2019 - Real GDP in 2018)/ Real GDP in 2018 * 100 = (20 - 18)/18 * 100 = 2/18 * 100 = 1/9 * 100 = 11.1%

2. GDP includes the market value of all the goods and services produced in an economy in a given year.

The purchase of a stock does not involve in real goods or services. So, it does not get included in GDP. However, the stockbroker is providing some services and the service has a market value. The market value of the service gets included in GDP.