Week 05, Day 4 - Assignment 3 Solutions

# Week 05, Day 4 - Assignment 3 Solutions - ASSIGNMENT#3...

This preview shows pages 1–2. Sign up to view the full content.

ASSIGNMENT #3 SOLUTIONS Note: All of the numbers in the calculations shown below were not rounded until the final answer. 1. a) Nominal GDP in 2006 = bicycles 2006 x price 2006 + snowboards 2006 x price 2006 = 560,000 x \$230 + 240,000 x \$140 = \$162,400,000 or \$162.4 million Nominal GDP in 2007 = bicycles 2007 x price 2007 + snowboards 2007 x price 2007 = 580,000 x \$250 + 250,000 x \$150 = \$182,500,000 or \$182.5 million b) Real GDP in 2006 = bicycles 2006 x base year price + snowboards 2006 x base year price = 560,000 x \$250 + 240,000 x \$150 = \$176,000,000 or \$176 million Real GDP in 2007 = bicycles 2007 x base year price + snowboards 2007 x base year price = 580,000 x \$250 + 250,000 x \$150 = \$182,500,000 or \$182.5 million c) You need your answers from parts a) and b) to answer this question. GDP deflator in 2006 = (nominal GDP 2006/real GDP 2006) x 100 = (\$162,400,000/\$176,000,000) x 100 = 92.2727 GDP deflator in 2007 = (nominal GDP 2007/real GDP 2007) x 100 = (\$182,500,000/\$182,500,000) x 100 = 100.00 Inflation = [(GDP deflator 2007 – GDP deflator 2006)/GDP deflator 2006] x 100 = [(100.00 – 92.2727)/92.2727] x 100 = 8.3744% or 8.4% d) To calculate inflation using the approximation method, you need to find the % change in nominal GDP and the % change in real GDP first. You need your answers from parts a) and b) to answer this question. % change in nominal GDP = [(nominal GDP in 2007 – nominal GDP in 2006)/

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 10/13/2009 for the course ECON 1221 taught by Professor Whitaker during the Winter '09 term at Langara.

### Page1 / 3

Week 05, Day 4 - Assignment 3 Solutions - ASSIGNMENT#3...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online