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Details: Use the following data to answer questions 1-3 (be sure to provide all calculations).?

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Details: Use the following data to answer questions 1-3 (be sure to provide all calculations).

For the year 2005:Quantitys are: CD's= 90, Tennis Racquets= 180 Prices are: CD's= $18, Tennis Racquets= $100

For the year 2006: Quantitys are: CD's= 100, Tennis Racquets=190, Prices are: CD's=$20, Tennis Racquets=$110

Calculate real GDP for 2005 and 2006 using 2005 prices. By what percent did real GDP grow?

Calculate the value of the price index for GDP for 2006 using 2005 as the base year. By what percent did prices increase?

Now calculate real GDP for 2005 and 2006 using 2006 prices. By what percent did real GDP grow?

Review the GDP information for the past few years from the Bureau of Economic Analysis's Website. Provide a brief summary of the GDP trends over that timeframe and discuss two or three events which may have caused these trends.

Be sure to show your work for each calculation

I just need some help I have tried to work this but keep getting different answers.

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2 ANSWERS


  1. A:

    90*18 + 180*100 = 19620

    Real GDP(2005) in 2005 prices = 19620

    100 * 18 + 190 * 100 = 20800

    Real GDP(2006) in 2005 prices = 20800

    Change=20800/19620=1.06= +6%

    B:

    90*18 + 180*100 = 19620

    Ourput(2005) in 2005 prices = 19620

    90*20 + 180*110 = 21600

    Output(2005) in 2006 prices = 21600

    Change=21600/19620=1.10= +10% <-this is inflation or CPI or change in price level.

    C:

    90*20 + 180*110 = 21600

    Real GDP(2005) in 2006 prices = 21600

    100*20 + 190*110 = 22900

    Real GDP(2006) in 2006 prices = 22900

    Change=22900/21600=1.06 = +6%

    Nominal growth= 22900/19620=1.167= +16.7%


  2. 1. : Real GDP in 2005 in 2005 prices

    = 90*18 + 180*100 = $19620

    Real GDP(2006) in 2005 prices =

    100 * 18 + 190 * 100 = $20800

    2. price index for GDP for 2006 with 2005 as base year: Use the values as weights:

    ouput values in 2005 were 1620 for CD and 18000 for for tennis rqts. So the weights were 1620/19620= 9/109 for CDs and 100/109 for tennis rqts.

    So price Index for 2005 with base 2005 is

    (9/100)*18 + (100/109)*100 = 10062/109 which equals 100.as the base year.

    Now with the same weightage, we calculate the average  price of 2006:

    (9/100)*20+ (100/109)*110 = 11180/109.

    So the price Index for 2006 with 2005 as base is:

    I= (11180/10062)*100= 101.11

    3. Real GDPs at 2006 Prices:

    Real GDP 2006 = 100 * 20 + 190 * 110 = $22,900

    Real GDP 2005 = 90*20 + 180*110 =$21,160

    4. For BEA please their websites and write what is the movement of the index and gdp growth rate and GDP price deflator: whether and how much gone up and down in 2 / 3 years.

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