Question

The table displays price and quantity information for two vehicle models produced by Ford Motor Company, the F-series trucks and Escape SUVs.
2016 2017
Price Quantity Price Quantity
Escape SUVs $24,485 307,069 $24,645 308,296
F-series trucks $44,400 820,799 $47,800 896,764


Round all numerical answers to two decimal places.

a. Calculate the amount contributed by Ford to U.S. real and nominal GDP from the sales of the two models in 2016 and 2017.Nominal GDP 2016:

billion
Nominal GDP 2017:

billion
Real GDP 2016:

billion
Real GDP 2017:

billion
b. Determine the growth rate of nominal GDP (if Ford were the entire economy).
Growth rate of nominal GDP:

%
c. Determine the growth rate of real GDP (if Ford were the entire economy).
Growth rate of real GDP:
%
d. Use the shortcut you learned to convert between real and nominal GDP growth rates to determine the growth rate of prices.
Growth rate of prices:
%
e. The increase in nominal GDP in part a is due to a change in

both quantity and prices.

quantity.

prices.

Answer 1

Answer:

a. The nominal GDP 2016 = $43.96 billion

The real GDP 2016 = $43.96 billion

The nominal GDP 2017 = $50.46 billion

The real GDP 2017 = $47.36 billion

b. The growth rate is of nominal GDP is 14.79%

c. The growth rate is of real GDP is 7.73%

d. The growth rate in prices is 6.55%

e. The increase in nominal GDP in part a is due to a change in both quantity and prices

Explanation:

a. The amount contributed by Ford to U.S. real and nominal GDP from the sales of the two models 2016 and 2017 are given as follows;

The nominal GDP 2016 = $24,485 × 307,069 + $44,400 × 820,799 = $43.96 billion

The real GDP 2016 = The nominal GDP 2016 = $43.96 billion

The nominal GDP 2017 = $24,645 × 308,296 + $47,800 × 896,764 = $50.46 billion

The inflation for Escape = ($24,645 - $24,485)/$24,485× 100 = 0.65%

GDP deflator for Escape = 100 + 0.65 = 100.65

The inflation for F-series = ($47,800 - $44,400)/$44,400× 100 = 7.66%

GDP deflator for F-series = 100 + 7.66 = 107.66

The real GDP 2017 = ($24,645 × 308,296)×100/100.65 + ($47,800 × 896,764)×100/107.66 = $47.36 billion

b. The growth rate is of nominal GDP is ((The nominal GDP 2017 - The nominal GDP 2016)/(The nominal GDP 2016)) × 100

The growth rate is of nominal GDP = (($50.46 billion - $43.96 billion)/$43.96 billion) × 100 = 14.79%

c. The growth rate is of real GDP is ((The real GDP 2017 - The real GDP 2016)/(The real GDP 2016)) × 100

The growth rate is of real GDP = (($47.36 billion - $43.96 billion

)/$43.96 billion) × 100 = 7.73%

d. The growth rate in prices is given as follows;

Price Deflator = (Nominal GDP/(Real GDP))×100

Price Deflator = ($50.46 billion/$47.36 billion)×100 = 106.55

The growth rate of prices = 106.55 - 100 = 6.55%

e. The increase in nominal GDP in part a is due to a change in both quantity and prices

Quantity increased from 307,069 in 2016 to 308,296 in 2017 for Escape SUVs

Quantity increased  from 820,799 in 2016 to 896,764 in 2017 for F-series trucks

Price increased from $24,485 in 2016 to $24,645 in 2017 for Escape SUVs.

Price increased from $44,400 in 2016 to $47,800 in 2017 for F-series trucks.