Question

Suppose that a simple economy produces only the following four goods and​ services: shoes,​ hamburgers, shirts, and cotton. ​ Further, assume that all of the cotton is used in the production of shirts. 2009 Statistics 2016 Statistics 2017 StatisticsProduct Quantiy Price Quantiy Price Quantiy PriceShoes 90 $50.00 100 $60.00 100 $65.00Hamburgers 75 2.00 100 2.00 120 2.25Shirts 70 40.00 60 35.00 85 35.00Cotton 12,000 0.90 12,000 0.75 13,000 0.80a. If the base year is the year 2009, then real GDP for 2016 equals $ _____. Round answer to nearest penny and the real GDP for 2017 equals $_____. Round answer to the nearest penny.
b. The annual growth rate of real GDP in 20174 is _____%. Enter response as a percentage rounded to 2 decimal places.

Answer 1

Answer:

a. If the base year is the year 2009, then real GDP for 2016 equals $7,600. Round answer to nearest penny and the real GDP for 2017 equals $8,640. Round answer to the nearest penny.

b. The annual growth rate of real GDP in 2017 is 13.68%. Enter response as a percentage rounded to 2 decimal places.

Explanation:

                        2009 Statistics     2016 Statistics     2017 Statistics

                        Quantity Price       Quantity Price     Quantity Price

Shoes                 90      $50.00        100     $60.00       100    $65.00

Hamburgers       75        $2.00         100      $2.00        120      $2.25

Shirts                   70      $40.00         60     $35.00        85     $35.00

Cotton          12,000        $0.90   12,000       $0.75  13,000      $0.80

GDP 2009 = (90 x $50) + (75 x $2) + (70 x $40) = $7,450

GDP 2016 = (100 x $60) + (100 x $2) + (60 x $35) = $8,300

GDP 2017 = (100 x $65) + (120 x $2.25) + (85 x $35) = $9,745

real GDP 2016 = (100 x $50) + (100 x $2) + (60 x $40) = $7,600

real GDP 2017 = (100 x $50) + (120 x $2) + (85 x $40) = $8,640

growth rate = (8,640 - 7,600) / 7,600 = 0.1368 or 13.68%