Question

Part 1

Suppose that nominal GDP was $11 trillion in 2040 in Mordor. In 2050, nominal GDP was $15 trillion in Mordor. The price level fell 3% between 2040 and 2050, and population growth was 2%. Between 2040 and 2050 in Mordor,

nominal GDP growth was %

and economic growth was %. (Give your answers to one decimal place.)

Part 2

Suppose that nominal GDP was $20 trillion in 2040 in Mordor. In 2050, nominal GDP was $18 trillion in Mordor. The price level rose 3% between 2040 and 2050, and population growth was 2%.

Between 2040 and 2050 in Mordor, nominal GDP growth was %

and economic growth was %. (Give your answers to one decimal place.)

Part 3

Suppose that nominal GDP was $8 trillion in 2040 in Mordor. In 2050, nominal GDP was $10 trillion in Mordor. The price level rose 18.0% between 2040 and 2050, and population growth was 13.0%.

Between 2040 and 2050 in Mordor, nominal GDP growth was %

and economic growth was %. (Give your answers to one decimal place.)

Answer 1

Part 1

Nominal GDP growth = (15 - 11)*100/11 = 36.4 %

Economic growth = Nominal GDP growth rate - inflation rate - population growth rate = 36.4% - (-3%) - 2% = 37.4%

Part 2

Nominal GDP growth = (18 - 20)*100/20 = -10%

Economic growth = Nominal GDP growth rate - inflation rate - population growth rate = -10% - 3% - 2% = -15%

Part 3

Nominal GDP growth = (10 - 8)*100/8 = 25%

Economic growth = Nominal GDP growth rate - inflation rate - population growth rate = 25% - 18% - 13% = -6%.