answer 5(5) - Econ 162-A1 A2 Kenny Christianson Fall 2015 due October 23 ANSWER KEY PROBLEM SET NUMBER FIVE 1 1 a GDP = C I G(X M = 11,800 2900

answer 5(5) - Econ 162-A1 A2 Kenny Christianson Fall 2015...

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Econ 162-A1, A2 Kenny Christianson Fall 2015 due: October 23 ANSWER KEY – PROBLEM SET NUMBER FIVE 1. 1. a. GDP = C + I + G + (X - M) = 11,800 + 2900 + 3200 + (2300 - 2900) = \$17,300 b. GNP = GDP + NFIA = 17,300 + 300 = \$17,600 NNP = GNP – CCA = 17,600 – 2800 = \$14,800 c. NI = W + i + R + profits = 9300 + 1700 + 600 + 3400 = \$15,000 d. Statistical Discrepancy = NNP - NI = 14,800 – 15,000 = - \$200 check – GDP using the income approach: (not required) GDP = W + i + R + profits – NFIA + CCA + SD GDP = 9300 + 1700 + 600 + 3400 – 300 + 2800 - 200 = \$17,300 2. a. To find nominal GDP in year 1, multiply the quantity in year 1 times the price in year 1 and then sum to find the total: YEAR 1 good quantity price Q 1 x P 1 rocks 200 \$1 \$200 socks 200 \$2 \$400 blocks 200 \$3 \$600 clocks 200 \$4 \$800 nominal GDP 1 = ∑ Q 1 x P 1 = \$2000 b. If year 1 is the base year, then in year 1 nominal GDP = real GDP. The set of prices being used to measure nominal GDP is the same as the set of prices being used to measure real GDP. So in year 1, real GDP 1 = nominal GDP 1 = \$2000. c. To find nominal GDP in year 2, multiply the quantity in year 2 times the price in year 2 and then sum to find the total: YEAR 2 good quantity price Q 2 x P 2 rocks 150 \$4 \$600 socks 220 \$5 \$1100 blocks 400 \$2 \$800 clocks 300 \$6 \$1800 nominal GDP 2 = ∑ Q 2 x P 2 = \$4300