Macroeconomics: Private and Public Choice
Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781305176799
Author: Gwartney
Publisher: Cengage
Question
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Chapter 8, Problem 14CQ

(a)

To determine

Identify the 2011 and 2012 real GDP.

(a)

Expert Solution
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Explanation of Solution

Table-1 shows the value of nominal GDP and the GDP deflator as follows:

Table-1
 

Nominal GDP

(Billions of currency)

GDP deflator

(2005=100)

Country2011201220112012
U15,075.715,684.8113.4115.4
C1,718.71,817.6115.2119.7
J470,623475,867.991.691.6
I1,579.21,566.3112.7112.7
A1,444.61,488.3127.4127.4
UK1,515.81,541.5117.1117.1

The real GDP can be calculated using the formula as follows:

Real GDP=Nominal GDPGDP deflator×100        (1)

Substitute the respective values in equation (1) to calculate the rea; GDP of country U.

Real GDP=15,075.7113.4×100=13,294.2

Therefore, the real GDP of Country U in 2011 is $13,294.2 billion.

Table-2 shows the value of the real GDP in 2011 and 2012, which is calculated using Equation-1 as follows:

  

Table-2

  
       

Nominal GDP

(Billions of currency)

GDP deflator

Real GDP

Real GDP

Country201120122011201220112012
U15,075.715,684.8113.4115.413,294.21,3591.68
C1,718.71,817.6115.2119.71,491.921,518.46
J470,623475,867.992.491.6509,332.25519,506.44
I1,579.21,566.3110.9112.71,423.981,389.79
A1,444.61,488.3128.1127.41,127.71,168.21
UK1,515.81,541.5115.5117.11,312.381,316.39

(b)

To determine

Identify the inflation rate in 2012.

(b)

Expert Solution
Check Mark

Explanation of Solution

The inflation rate in 2014 can be calculated using the formula as follows:

Inflation rate=(GDP deflatorCurrent yearGDP deflatorBase yearGDP deflatorBase year)×100        (2)

Use Equation-2 to calculate the inflation rate of Country U in 2014 as follows:

Inflation rate=(115.4113.4113.4)×100=1.76

Therefore, the inflation rate is 1.76%.

Table-3 shows the value of the inflation rate, which is calculated using Equation-2 as follows:

   

Table-3

    
        

Nominal GDP

(Billions of currency)

GDP deflator

Real GDP

Real GDP

Inflation rate
Country2011201220112012201120122012
U15,075.715,684.8113.4115.413,294.21,3591.681.76%
C1,718.71,817.6115.2119.71,491.921,518.463.90%
J470,623475,867.992.491.6509,332.25519,506.44-0.86%
I1,579.21,566.3110.9112.71,423.981,389.791.62%
A1,444.61,488.3128.1127.41,127.71,168.21-0.54%
UK1,515.81,541.5115.5117.11,312.381,316.391.38%

(c)

To determine

Identify the country that has the highest growth rate of real GDP.

(c)

Expert Solution
Check Mark

Explanation of Solution

The growth rate can be calculated using the formula as follows:

Growth rate=(Real GDPCurrent yearRealGDPBase yearRealGDPBase year)×100        (3)

Use Equatrion-3 to calculate the growth rate of real GDP as follows:

Growth rate=(13,591.6813,294.213,294.2)×100=2.237

Therefore, the growth rate of real GDP is 2.237%.

Table-4 shows the growth rate in 2012, which is calculated using the Equation-3 as follows:

Table-4
Nominal GDPReal GDPInflation rateGrowth rate
Country201120122011201220122012
U15,075.715,684.813,294.213,591.681.76%2.237%
C1,718.71,817.61,491.921,518.463.90%1.778%
J470,623475,867.9509,332.25519,506.44-0.86%1.997%
I1,579.21,566.31,423.981,389.791.62%-2.40%
A1,444.61,488.31,127.71,168.21-0.54%3.592%
UK1,515.81,541.51,312.381,316.391.38%0.305%

According to Table-4, Country A has the highest growth rate of real GDP, which is 3.592% and Country I has the lowest growth rate of real GDP, which is -2.40%.

(d)

To determine

Identify the countries that have the highest and lowest inflation rate.

(d)

Expert Solution
Check Mark

Explanation of Solution

According to Table-3, Country C has the highest inflation rate, which is 3.90% and Country J has the lowest inflation rate, which is -0.86%.

(e)

To determine

Identify the country that has the most inflation

(e)

Expert Solution
Check Mark

Explanation of Solution

According to the data from Table-4, Country C has the highest inflation rate, which is 3.90%. Therefore, Country C has the most inflation during 2012.

Economics Concept Introduction

Inflation: Inflation is a sustained rise in the price level of a selected basket of goods and service for a particular period.

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