Question

Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity A $2 250 $3 200 B $3 300 $2 400 C $4 400 $5 500 What was the growth rate of real gross domestic product (GDP) between the two years

Answer 1

Answer:

20%

Explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Nominal GDP is GDP calculated using current year prices while Real GDP is GDP calculated using base year prices. Real GDP has  

Real GDP in 2015 = ( $2 x 250) + ($3 x 300) + ($4 x 400) = $3000

Real GDP in 2016 = ( $2 x 200) + ($3 x 400) + ($4 x 500) = $3600

Growth rate in real GDP = $3600 / $3000 - 1 = 0.2 = 20%