Question

Suppose that the nominal GDP for 1980 is 490 while the 1980 real GDP is 118. If the base year is 1970, how much larger is the 1980 price level compared to the 1970 price level?

Answer #1

GDP Deflator is used to compare the price levels from one year to another. It is a measure of inflation in the economy. It can be used to compare price levels in the current year to that of the base year.

GDP Deflator is the ratio of value of output in an economy in a particular year at current prices to that of prices in the base year. This means that it is the ratio of nominal GDP to real GDP.

GDP Deflator = (Nominal GDP / Real GDP) * 100

Here,

Nominal GDP in 1980 = 490

Real GDP in 1980 = 118

Thus, GDP Deflator = (Nominal GDP / Real GDP) * 100 = (490/118)*100 = 415.25

Thus, the price level in 1980 is 4.1525 ( i.e. 415.25/100) times to the price level in 1970.

The accompanying table shows data on nominal GDP (in billions of
dollars), real GDP (in billions of 2005 dollars), and population
(in thousands) of the United States in 1960, 1970, 1980, 1990,
2000, and 2010. The U.S. price level rose consistently over the
period 1960–2010.
Year Nominal GDP (billions of dollars) Real GDP (billions of
2005 dollars) Population (thousands)
1960 $526.4 $2,828.5 180,760
1970 1,038.5 4,266.3 205,089
1980 2,788.1 5,834.0 227,726
1990 5,800.5 8,027.1 250,181
2000 9,951.5 11,216.4 282,418
2010...

Explain why, given the fact that the base year is 2000, real GDP
in 1970 is much higher than nominal GDP (for the base year)?

Suppose this year’s nominal GDP is $1,000 million and price
level is 100. If nominal GDP increases by 2 percent and the price
level goes up by 3 percent next year, calculate next year’s nominal
GDP, price level, and real GDP.

Suppose this year’s nominal GDP is $1,000 million and price
level is 100. If nominal GDP increases by 2 percent and the price
level goes up by 3 percent next year, calculate next year’s nominal
GDP, price level, and real GDP.

3.
You are going to get quarterly data for Nominal GDP, Real GDP and
the GDP Price Index from the database compiled by the St. Louis
Federal reserve bank (FRED). For each of these data sets, you can
either find the numbers you need by moving the mouse on the graph
to the correct location, or download the file into a spreadsheet.
Whichever you find easier is fine.
Specifically:
Nominal GDP
https://fred.stlouisfed.org/series/GDP
Real GDP
https://fred.stlouisfed.org/series/GDPC1
GDP price index
https://fred.stlouisfed.org/series/GDPCTPI
a)...

. Suppose Nominal GDP in 2017 is $18 trillion, and nominal GDP
in 2016 is $17.6 trillion, and the GDP deflator in 2016 is 99
(=.99), and 2017 is the base year. The rate of growth in real GDP
in 2016 is about: a. -1.2% c. 1.2% b. -1.1% d. .2%

Nominal GDP increases from $5 trillion to $5.5 trillion
while the price level increases by 10%. Has real income
increased?
Nominal GDP increases from $6 trillion to $6.8 trillion
while real GDP increases from $6 trillion to $6.2 trillion. What
happened to the price level?
Nominal GDP increases from $7 trillion to $8 trillion
while real GDP increases from $7 trillion to $7.5 trillion. By what
percent did real income change?

GDP:
Group of answer choices
real GDP is calculated by multiplying nominal GDP by the GDP
deflator
real GDP is adjusted for changes in the price level
nominal GDP can only change if there is a change in prices
real GDP is GDP per person

Suppose that nominal GDP was $9000000.00 in 2005 in Orange
County California. In 2015, nominal GDP was $12000000.00 in Orange
County California. The price level rose 3.00% between 2005 and
2015, and population growth was 4.50%. Calculate the following
figures for Orange County California between 2005 and 2015.
Nominal GDP growth was __%
Economic growth was __%
Inflation was __%
Real GDP growth was __%
Per capita GDP growth was __%
Real per capita GDP growth was __%

Contrast the ideas of nominal and real GDP. Why is one more
reliable than the other for comparing changes in the standard of
living over a series of years? Use the concept of real and nominal
GDP to compare the years 1980 and 2017. Which year was a better
year for the economy and why

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