Question

1. Suppose that nominal GDP was $11 trillion in 2040 in Bedrock. In 2050, nominal GDP was $15 trillion in Bedrock. The price level fell 6% between 2040 and 2050, and population growth was 3%. Between 2040 and 2050 in Mordor, nominal GDP growth was______% and economic growth was______%.
2. Suppose that nominal GDP was $20 trillion in 2040 in Mordor. In 2050, nominal GDP was $18 trillion in Mordor. The price level rose 3% between 2040 and 2050, and population growth was 2%. Between 2040 and 2050 in Mordor, nominal GDP growth was______% and economic growth was_______%.
3. Suppose that nominal GDP was $8 trillion in 2040 in Mordor. In 2050, nominal GDP was $10 trillion in Mordor. The price level rose 18.0% between 2040 and 2050, and population growth was 13.0%. Between 2040 and 2050 in Mordor, nominal GDP growth was______% and economic growth was______%.

Answer 1

Answer and Explanation:

The computation is shown below;

1.

Nominal GDP growth is

= (Nominal GDP as on 2050 - Nominal GDP as on 2040) × 100 ÷ (Nominal GDP as on 2040)

= ($15 trillion - $11 trillion) × 100 ÷ $11 trilion

= 36.4 %

Now

Economic growth is

= Nominal GDP growth rate - fall in price level - population growth rate

= 36.4% - (-6%) - 3%

= 39.4%

2.

Nominal GDP growth is

= (Nominal GDP as on 2050 - Nominal GDP as on 2040) × 100 ÷ (Nominal GDP as on 2040)

= ($18 trillion - $20 trillion) × 100 ÷ $20 trilion

= -10%

Now

Economic growth is

= Nominal GDP growth rate - rise in price level - population growth rate

= -10% -  3% - 2%

= -15%

3.

Nominal GDP growth is

= (Nominal GDP as on 2050 - Nominal GDP as on 2040) × 100 ÷ (Nominal GDP as on 2040)

= ($10 trillion - $8 trillion) × 100 ÷ $8 trilion

= 25%

Now

Economic growth is

= Nominal GDP growth rate - rise in price level - population growth rate

= 25% - 18% - 13%

= -6%