MACROECONOMICS IN MODULES
5th Edition
ISBN: 9781319245368
Author: KRUGMAN
Publisher: MAC HIGHER
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Question
Chapter 7, Problem 15P
To determine
Concept Introduction:
Inflation rate: The overall increase in
Formula to calculate inflation rate is,
Expert Solution & Answer
Explanation of Solution
a. Percentage change in production.
Percentage change in production of computer
Percentage change in production of Pens
| Year | Quantity of Pens(B) | Total Production  | Old Production(C) | Change in Production(D) | Percentage Change in Production  | |
| 2014 | 10 | 100 | 1,000 | - | - | - |
| 2015 | 12 | 105 | 1,260 | 1,000 | 260 | 26% |
| 2016 | 14 | 110 | 1,540 | 1,260 | 280 | 22.2% |
Percentage change in production of pizzas
| Year | Price of Pizza($)(A) | Quantity of Pizza(B) | Total Production  | Old Production(C) | Change in Production(D) | Percentage Change in Production  |
| 2014 | 15 | 2 | 30 | - | - | - |
| 2015 | 16 | 2 | 32 | 30 | 2 | 6.7% |
| 2016 | 17 | 3 | 51 | 32 | 19 | 59.3% |
b. Percentage change in prices.
Percentage change in price of computer
| Year | Price of Computer($) | Old Price(A) | Change in Price(B) | Percentage Change in Price  |
| 2014 | 900 | - | - | |
| 2015 | 1,000 | 900 | 100 | 11.1% |
| 2016 | 1,050 | 1,050 | 0 | 0% |
Percentage change in price of Pens
| Year | Price of Pens($) | Old Price (A) | Change in Price (B) | Percentage Change in Price  |
| 2014 | 10 | - | - | |
| 2015 | 12 | 10 | 2 | 20% |
| 2016 | 14 | 12 | 2 | 16.7% |
Percentage change in price of Pizza
| Year | Price of Pizza($) | Old Price (A) | Change in Price (B) | Percentage Change in Price  |
| 2014 | 15 | - | - | |
| 2015 | 16 | 15 | 1 | 6.7% |
| 2016 | 17 | 16 | 1 | 6.25% |
c. Nominal GDP.
Total production of computer, Pens and pizzas is calculated in part a
| Year | Total Production of Computer(A) | Total Production of Pens(B) | Total Production of Pizzas(C) | Nominal GDP  |
| 2014 | 9,000 | 1,000 | 30 | 10,030 |
| 2015 | 10,500 | 1,260 | 32 | 11,792 |
| 2016 | 1,2600 | 1,540 | 51 | 14,191 |
Percentage change in Nominal GDP
| Year | Nominal GDP(A) | Old GDP(B) | Change in GDP | Percentage Change in Nominal GDP  |
| 2014 | 10,030 | - | - | - |
| 2015 | 11,792 | 10,030 | 1,762 | 17.6% |
| 2016 | 14,191 | 11,792 | 2,399 | 20.34% |
d. Real GDP.
Real GDP
| Year | Total Production of Computer(A) | Total Production of Pens(B) | Total Production of Pizzas(C) | Real GDP  |
| 2014 | 9,000 | 1,000 | 30 | 10,030 |
| 2015 | 9,450 | 1,050 | 30 | 10,530 |
| 2016 | 10,800 | 1,100 | 45 | 11,945 |
Percentage change in real GDP
| Year | Real GDP | Old GDP(A) | Change in GDP (B) | Percentage Change in Real GDP  |
| 2014 | 10,030 | - | - | - |
| 2015 | 10,530 | 10,030 | 500 | 5% |
| 2016 | 11,945 | 10,530 | 1,415 | 13.43% |
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