FIT GDP
REVIEW
In 1995 the Nominal GDP = $100 billion
and Real GDP = $120 billion. Calculate
the GDP deflator for this economy in
1995.
In 1995 the Nominal GDP = $100 billion
and Real GDP = $120 billion. Calculate
the GDP deflator for this economy in
1995.
GDP
=
Deflator
Nominal GDP
Real GDP
100 X 100 = 83
120
X 100
The nominal income of an employee in
Chuckecheese in 1992 was $12,000. The CPI
for 1992 (the base year) was 100, and the CPI
for 2003 is 115. What would the income of
the same employee be in 2003 to keep him at
the same purchasing power as in 1992?
The nominal income of an employee in
Chuckecheese in 1992 was $12,000. The CPI
for 1992 (the base year) was 100, and the CPI
for 2003 is 115. What would the income of
the same employee be in 2003 to keep him at
the same purchasing power as in 1992?
Real
income
=
Nominal income
Price index
X__
X 100 = 12,000
1.15
X = $13,800
X 100
Suppose the following table represents the goods and services
produced in a very simple economy. Assume that steel is used
as an input in the production of autos. Using that information,
calculate GDP.
product
Quantity
Price
Steel
1,000
$100
I pods
5,000
$300
Autos
500
$25,000
Legal services
100
$2,000
Suppose the following table represents the goods and services
produced in a very simple economy. Assume that steel is used
as an input in the production of autos. Using that information,
calculate GDP.
product
Quantity
Price
Steel
1,000
$100
I pods
5,000
$300
Autos
500
$25,000
Legal services
100
$2,000
(5,000 x $300) + (500 x $25,000) + (100 x $2,000) =
14,200,000
Between 2007 and 2008, if an economy’s
exports rise by $8 billion and its imports fall by
$8 billion, by how much will GDP change
between the two years, all else equal?
The change in net exports will increase
GDP by $16 billion
2002
2007
Product
Quantity
Price
Product
Quantity
Price
Movies
20
$6
Movies
30
$7
Burgers
100
$2
Burgers
90
$2.5
Bikes
2
$1,000
Bikes
6
$1,100
Suppose that a very simple economy produces three goods:
movies, burgers, and bikes. The quantities produced and their
corresponding prices for 2002 and 2007 are shown in the table
above. What is nominal GDP in 2007?
(30 x $7) + (90 x $2.50) + (6 x $1,100) = $7,035
2002
2007
Product
Quantity
Price
Product
Quantity
Price
Movies
20
$6
Movies
30
$7
Burgers
100
$2
Burgers
90
$2.5
Bikes
2
$1,000
Bikes
6
$1,100
What is the real GDP in 2007, using 2002 as the base year?
(30 x $6) + (90 x $2) + (6 x $1,000) = $6,360
In nominal GDP rises we can say that
a. Production has fallen and prices have risen
b. Production has risen and prices remain constant
c. Production has risen or prices have risen or both have risen
d. Prices have risen and production remains constant
e. We can’t say that anything has happened
In nominal GDP rises we can say that
a. Production has fallen and prices have risen
b. Production has risen and prices remain constant
c. Production has risen or prices have risen or both have risen
d. Prices have risen and production remains constant
e. We can’t say that anything has happened
You got a job in year 2000 with a salary of $25,000. In
2002, you receive a $2,000 increase in your salary. CPI
in 2002 with base year 2000 is 108. Calculate your
REAL income in 2000 and 2002. Calculate the
percentage change in your real income.
You got a job in year 2000 with a salary of $25,000. In
2002, you receive a $2,000 increase in your salary. CPI
in 2002 with base year 2000 is 108. Calculate your
REAL income in 2000 and 2002. Calculate the
percentage change in your real income.
Real
Income
=
nominal income
price index in hundredths
2000 Real income = $25,000
2002 Real income =
$27,000
= $25,000
1.08
Change in Real income --- 0%
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