7. Consider the following data on the U.S. economy: Year Nominal GDP (in billions of dollars) GDP Deflator (base year 2012) 2018 20,501 110.4 1998 9,063 75.3 a. What was the growth rate of nominal GDP between 1998 and 2018? (Hint: The growth rate of a variable X over an N-year period is calculated as X X N 100 3 2 [( / ) 1]. final initial 1/ ) b. What was the growth rate of the GDP deflator between 1998 and 2018? c. What was real GDP in 1998 measured in 2012 prices? d. What was real GDP in 2018 measured in 2012 prices? e. What was the growth rate of real GDP between 1998 and 2018? f. Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.
Answers
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Explanation:
Answer: In order to solve this issue, we must ascertain the nominal GDP's annual increase rate from 1998 to 2018.
Let's think about the main ideas:
The entire worth of the country's created final products and services, valued at today's prices, is the nominal GDP.
We will apply the following method to determine the total GDP growth rate:
Explanation: Growth rate of Nominal GDP is [( Nominal GDP final /Nominal GDP initial ) 1 /N -1 ] 100
Where:
N denotes a time frame of two years or less.
Let's list the quantities that are provided:
Annual Nominal GDP (in billions of dollars)
2018 20,501
1998 9,063
We can calculate the nominal growth rate of the economy if we enter the data from the prior stage.
20 years of GDP.
Nominal GDP growth rate is calculated as follows: [(NominalGDP2018/NominalGDP1998)1/201]100 = [(20,501/ 9,063)0.051].⋅100
=4.17%
Nominal GDP increased at a pace of 4.17% from 1998 to 2018.
To sum up, from 1998 to 2018, the net GDP grew by 4.17% annually.
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