
Sub part (a):
Nominal
Sub part (a):

Explanation of Solution
The GDP is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year. There are two different ways of calculating the GDP of the economy and they are the Real GDP and the Nominal GDP. The Real GDP is the GDP calculated at the constant prices. There will be a base
The nominal GDP of the economy can be calculated by multiplying the quantity produced by the per unit price of the commodity. The quantity produced and price in year 1 were 3 bars of chocolate and the price was $4. Thus, the Nominal GDP of year 1 can be calculated as follows:
Thus, the Nominal GDP of year 1 is $12.
Similarly, the quantity produced and price in year 2 were 4 bars of chocolate and $5 respectively. Thus, the Nominal GDP of year 2 can be calculated as follows:
Thus, the Nominal GDP of year 2 is $20.
The quantity produced and price in year 3 were 5 bars of chocolate and $6 respectively. Thus, the Nominal GDP of year 3 can be calculated as follows:
Thus, the Nominal GDP of year 3 is $30.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
Nominal GDP: The Nominal GDP is the GDP calculated at the current prices.
Sub part (b):
Real GDP.
Sub part (b):

Explanation of Solution
The base year is year 1 and thus, the real GDP and the Nominal GDP of the year 1 will be the same and thus, the Real GDP of year 1 will be equal to the Nominal GDP of year 1 which is $12.
The quantity produced and price in year 2 were 4 bars of chocolate and the base price was $4. Thus, the Real GDP of year 2 can be calculated as follows:
Thus, the Real GDP of year 2 is $16.
The quantity produced and price in year 3 were 5 bars of chocolate and the base price was $4. Thus, the Real GDP of year 3 can be calculated as follows:
Thus, the Real GDP of year 3 is $20.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.
Sub part (c):
GDP deflator.
Sub part (c):

Explanation of Solution
The GDP deflator is the implicit price deflator. It can be calculated by dividing the Nominal GDP with the Real GDP and multiplying the value with 100 as follows:
Thus, by substituting the values of Nominal and Real GDP in the equation, we can calculate the GDP deflator as follows:
Thus, the GDP deflator in Year 1 is 100. Similarly, the GDP deflator for year 2 can be calculated as follows:
Thus, the GDP deflator in Year 2 is 125.
The GDP deflator for year 3 can be calculated as follows:
Thus, the GDP deflator in Year 3 is 150.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
GDP deflator: It is an implicit price deflator.
Sub part (d):
Growth of Real GDP.
Sub part (d):

Explanation of Solution
The growth rate of Real GDP from year 2 to year 3 can be calculated by the following formula:
Thus, the growth rate of Real GDP from year 2 to year 3 is by 25 percent.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.
Sub part (e):
Growth rate of inflation.
Sub part (e):

Explanation of Solution
The inflation rate is the rate at which the inflation rose in the economy. The inflation rate can be calculated using the GDP deflator as follows:
Thus, the growth rate of inflation from year 2 to year 3 is by 20 percent.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.
Sub part (f):
Growth rate of Real GDP and inflation rate.
Sub part (f):

Explanation of Solution
The growth rate of the real GDP can be calculated with the help of the percentage change in the quantity because the price is base price which is fixed and does not change. Similarly, in the case of calculation of the inflation rate, the percentage change in the price of the commodity could be measured.
Concept introduction:
Gross Domestic Product (GDP): It is the summation of the money value of all the goods and services produced within the political boundary of a country within a financial year.
Real GDP: The Real GDP is the GDP calculated at the constant prices. There will be a base price index and the value of goods and services that will be calculated on the base of the constant prices. Thus, it will measure the GDP of the economy on the same base year price index which will help us to identify the inflation in the economy.
Inflation: It is an increase in the general price level of goods and services in an economy over a period of time.
Want to see more full solutions like this?
Chapter 15 Solutions
EBK ESSENTIALS OF ECONOMICS
- agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by…arrow_forwardAfter the ban is imposed, Joe’s firm switches to the more expensive biodegradable disposable cups. This increases the cost associated with each cup of coffee it produces. Which cost curve(s) will be impacted by the use of the more expensive biodegradable disposable cups? Why? Which cost curve(s) will not shift, and why not? Please use the table below to answer this question. For the second column (“Impacted? If so, how?”), please use one of the following three choices: No shift; Shifts up (i.e., increases: at nearly any given quantity, the cost goes up); or Shifts down (i.e., decreases: at nearly any given quantity, the cost goes down). $ Cost Curve Impacted? If so, how? Explanation of the Shift: Why or Why Not AFC No shift. Fix costs stay the same, regardless of quantity. Fixed cost is calculated as Fixed Cost/Quantity. Since fixed costs remain unchanged, AFC stays the same for each quantity. MC Shifts up. Since the biodegradable cups are more expensive, the…arrow_forwardStyrofoam is non-biodegradable and is not easily recyclable. Many cities and at least one state have enacted laws that ban the use of polystyrene containers. These locales understand that banning these containers will force many businesses to turn to other more expensive forms of packaging and cups, but argue the ban is environmentally important. Shane owns a firm with a conventional production function resulting in U-shaped ATC, AVC, and MC curves. Shane's business sells takeout food and drinks that are currently packaged in styrofoam containers and cups. Graph the short-run AFC0, AVC0, ATC0, and MC0 curves for Shane's firm before the ban on using styrofoam containers.arrow_forward
- PART II: Multipart Problems wood or solem of triflussd aidi 1. Assume that a society has a polluting industry comprising two firms, where the industry-level marginal abatement cost curve is given by: MAC = 24 - ()E and the marginal damage function is given by: MDF = 2E. What is the efficient level of emissions? b. What constant per-unit emissions tax could achieve the efficient emissions level? points) c. What is the net benefit to society of moving from the unregulated emissions level to the efficient level? In response to industry complaints about the costs of the tax, a cap-and-trade program is proposed. The marginal abatement cost curves for the two firms are given by: MAC=24-E and MAC2 = 24-2E2. d. How could a cap-and-trade program that achieves the same level of emissions as the tax be designed to reduce the costs of regulation to the two firms?arrow_forwardOnly #4 please, Use a graph please if needed to help provearrow_forwarda-carrow_forward
- For these questions, you must state "true," "false," or "uncertain" and argue your case (roughly 3 to 5 sentences). When appropriate, the use of graphs will make for stronger answers. Credit will depend entirely on the quality of your explanation. 1. If the industry facing regulation for its pollutant emissions has a lot of political capital, direct regulatory intervention will be more viable than an emissions tax to address this market failure. 2. A stated-preference method will provide a measure of the value of Komodo dragons that is more accurate than the value estimated through application of the travel cost model to visitation data for Komodo National Park in Indonesia. 3. A correlation between community demographics and the present location of polluting facilities is sufficient to claim a violation of distributive justice. olsvrc Q 4. When the damages from pollution are uncertain, a price-based mechanism is best equipped to manage the costs of the regulator's imperfect…arrow_forwardFor environmental economics, question number 2 only please-- thank you!arrow_forwardFor these questions, you must state "true," "false," or "uncertain" and argue your case (roughly 3 to 5 sentences). When appropriate, the use of graphs will make for stronger answers. Credit will depend entirely on the quality of your explanation. 1. If the industry facing regulation for its pollutant emissions has a lot of political capital, direct regulatory intervention will be more viable than an emissions tax to address this market failure. cullog iba linevoz ve bubivorearrow_forward
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningBrief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage LearningPrinciples of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning





