Assume in a small island economy (without connection to other economies) just four goods are produced (and consumed): Goodl, Good2, Good3 and Good4. The following table gives you the produced (and consumed) quantities for three years, as well as the market prices for these goods. Quantity | Price Quantity | Price Quantity | Price 2014 2014 2015 2015 2016 2016 Good1 21 9 20 24 8 Good2 Good3 Good4 10 9. 10 10 9 9. 33 6. 33 38 3 1 41 1 41 1 36 (a) Calculate nominal GDP for each year. (b) Calculate the annual growth rate of the nominal GDP.
(a)
Nominal GDP = Current year price * Current year quantity
=> Nominal GDP = (Current year price of good 1 * current year quantity of good 1) + (Current year price of good 2 * current year quantity of good 2) + (Current year price of good 3 * current year quantity of good 3) + (Current year price of good 4 * current year quantity of good 4)
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Year 2014
Nominal GDP = (21 *9) + (10 *9) + (33 *6) + (1 *41)
=> Nominal GDP = 189 + 90 + 198 + 41
=> Nominal GDP = 518
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Year 2015
Nominal GDP = (20 *9) + (10 *10) + (33 *5) + (1 *41)
=> Nominal GDP = 180 + 100 + 165 + 41
=> Nominal GDP = 486
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Year 2016
Nominal GDP = (24 *8) + (9 *9) + (38 *3) + (1 *36)
=> Nominal GDP = 192 + 81 + 114 + 36
=> Nominal GDP = 423
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Nominal GDP of 2014 is 518
Nominal GDP of 2015 is 486
Nominal GDP of 2016 is 423
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