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Chapter 9: Problem 13

If GDP rose from \(\$ 6\) trillion to \(\$ 9\) trillion and prices rose by 50 percent over this period, \((\mathrm{LO})\) a) real GDP fell by 100 percent b) real GDP fell by 50 percent c) real GDP stayed the same d) real GDP rose by 50 percent e) real GDP rose by 100 percent

Short Answer

Expert verified
Real GDP rose by 50 percent over the given period. The correct answer is: d) real GDP rose by 50 percent.

Step by step solution

01

Calculate the Initial Real GDP

First, we will calculate the initial real GDP (GDP_0_real) using the formula: \[GDP_0_real = \frac{GDP_0_nominal}{1 + \frac{Inflation_0}{100}}\] Where \(GDP_0_nominal = \$6\:trillion\), and \(Inflation_0 = 50\%\). \[GDP_0_real = \frac{6\:trillion}{1 + \frac{50}{100}} = \frac{6\:trillion}{1.5} = \$4\:trillion\]
02

Calculate the Final Real GDP

Now, we calculate the final real GDP (GDP_1_real) using the formula: \[GDP_1_real = \frac{GDP_1_nominal}{1 + \frac{Inflation_1}{100}}\] Where \(GDP_1_nominal = \$9\:trillion\), and \(Inflation_1 = 50\%\). \[GDP_1_real = \frac{9\:trillion}{1 + \frac{50}{100}} = \frac{9\:trillion}{1.5} = \$6\:trillion\]
03

Calculate the Percentage Change in Real GDP

Finally, we can calculate the percentage change in real GDP using the following formula: \[\% \:change\:in\:real\:GDP = \frac{(GDP_1_real - GDP_0_real)}{GDP_0_real} \times 100\%\] \[\% \:change\:in\:real\:GDP = \frac{(\$6\:trillion - \$4\:trillion)}{\$4\:trillion} \times 100\%\] \[\% \:change\:in\:real\:GDP = \frac{\$2\:trillion}{\$4\:trillion} \times 100\% = 50\%\] According to our calculation, Real GDP rose by 50 percent over the given period. So, the correct answer is: d) real GDP rose by 50 percent

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Most popular questions from this chapter

In 2030 Nigeria had a GDP of \(\$ 700\) billion and depreciation of \(\$ 100\) billion. The price level did not rise in 2031 , but its GDP rose to \(\$ 710\) billion and its depreciation rose to \(\$ 180\) billion. Most economists would say that (LO2) a) the Nigerian economy did better in 2030 b) the Nigerian economy did better in 2031 c) there is no way of determining which year was better

Which is not counted in GDP? (LO2) a) A Social Security check sent to a retiree. b) Government spending on highway building. c) Money spent on an airline ticket. d) Money spent by a company to build a new office park.

Which of the following statements is true? (LO6, 7) a) The United States has the world's largest GDP and per capita GDP. b) The United States has the world's largest GDP, but not the world's largest per capita GDP. c) The United States has the world largest per capita GDP, but not the world's largest GDP. d) The United States has neither the world's largest GDP nor the world's largest per capita GDP.

Which statement is true? (LO7) a) Over longer and longer periods of time, comparisons of real per capita GDP become increasingly valid. b) Over the short run, say, up to 10 years, comparisons of per capita real GDP are quite valid. c) International comparisons of per capita real GDP may be made with less caution than comparisons over time within a given country. d) None of these statements is true.

Which is the most accurate statement? (LO6, 8) a) We may be underestimating our GDP by as much as 50 percent by not taking into account the underground economy. b) Bartered goods and services are generally counted in GDP. c) Within the next five years, China will have a larger GDP than the United States. d) Although GDP has many shortcomings, it is still a very useful economic concept.
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