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Period: _____
Year 1
Year 2
In this example, real GDP per capita fell even though output growth was positive. Developing countries with positive
output growth but higher rates of population growth often experience this condition.
Practicing Conversions of Nominal GDP to Real GDP
Use the table below to answer the questions 1-6.
Year 3
Year 4
Nominal GDP
$5,000
$6,600
GDP deflator
125
150
Population
11
12
6. What is the rate of real output growth per capita between Years 3 and 4?
(Hint: Use per capita data in the output growth rate formula.)
The economy of Grossmania produces three goods: Widgets, Gizmos, and Thingamajigs. The accompanying table shows
the output and prices for years 2006 and 2007. (Hint: GDP, in its most basic form, is P x Q. You take the quantity of
output and multiply by the price of output.)
Year
2006
2007
Widgets
Price
$100
$110
Gizmos
Quantity Price
1
$10
1
$12
Thingamajigs
Quantity Price
Quantity
8
$5
4
10
$4
5
9. Using 2006 as the base year, calculate the real GDP for 2007.
10. What is the GDP deflator for 2007? What was the inflation rate between 2006 and 2007?
11. Compute the real rate of output growth from 2006 to 2007.
Quantity of Apples
Price of Apples
Quantity of Oranges
Price of Oranges
Year 1
3,000
$0.20
2,000
$0.40
Year 2
4,000
$0.30
3,000
$0.50
Year 1
Real GDP per capita = Year 1 real GDP
= $1,000 = $10
Population in Year 1
100
Year 2
Real GDP per capita = $1,028 = $9.30
110
In this example, real GDP per capita fell even though output growth was positive. Developing countries with positive
output growth but higher rates of population growth often experience this condition.
Practicing Conversions of Nominal GDP to Real GDP
Use the table below to answer the questions 1-6.
Year 3
Year 4
Nominal GDP
$5,000
$6,600
GDP deflator
125
150
Population
11
12
The economy of Grossmania produces three goods: Widgets, Gizmos, and Thingamajigs. The accompanying table shows
the output and prices for years 2006 and 2007.
Year
2006
2007
7.
Widgets
Gizmos
Price
Quantity Price
$100
1
$10
$110
1
$12
Calculate the nominal GDP for:
Thingamajigs
Quantity Price
Quantity
8
$5
4
10
$4
5
11%
11. Compute the real rate of output growth from 2006 to 2007. ____12.5%___
($225 -- $200) x100 = 12.5%
$200
12. Which of the following is true of real GDP?
I.
It is adjusted for changes in prices.
I.
It is always equal to nominal GDP.
II. It increases whenever aggregate
output increases.
a. I only
b. II only
c. III only
d. I and III
e. I, II, and III
13. The best measure for comparing a countrys
aggregate output over time is
a. Nominal GDP.
b. Real GDP.
c. Nominal GDP per capita.
d. Real GDP per capita.
e. Average GDP per capita.
Quantity of Apples
Price of Apples
Quantity of Oranges
Price of Oranges
Year 1
3,000
$0.20
2,000
$0.40
Year 2
4,000
$0.30
3,000
$0.50