A futures market trades contracts on the growth rate for nominal GDP. The contract pays $X to the buyer, where X is 100 times the growth rate in nominal GDP from last year to this year. For example, if nominal GDP grows by 1% over last year, the contract pays $100 (1 x 100). Nominal GDP last year was $28,137 billion. Contracts on the futures markets are currently selling for $460. What is the market's prediction for nominal GDP this year?

A futures market trades contracts on the growth rate for nominal GDP. The contract pays $X to the buyer, where X is 100 times the growth rate in nominal GDP from last year to this year. For example, if nominal GDP grows by 1% over last year, the contract pays $100 (1 x 100). Nominal GDP last year was $28,137 billion. Contracts on the futures markets are currently selling for $460. What is the market's prediction for nominal GDP this year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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