Unformatted text preview: Âµ = real GDP at the beginning of the year Â¶? = change in prices during year Â¶Âµ = change in output during year We are told that nominal GDP at the end of the year, ( ? + Â¶? )( Âµ + Â¶Âµ ), equals 1.10 times nominal GDP at the beginning of the year, ?Âµ . That is ( ? + Â¶? )( Âµ + Â¶Âµ ) = 1 . 10 ?Âµ (4.42) Furthermore, the price level at the end of the year, ? + Â¶? equals 1.05 times the price level of the start of year, ? : ? + Â¶? = 1 . 05 ? Substituting this in equation (4.38) yields 1 . 05 ? ( Âµ + Â¶Âµ ) = 1 . 10 ?Âµ which can be solved to give Â¶Âµ = ( 1 . 10 1 . 05 âˆ’ 1) Âµ = 0 . 0476 The growth rate of real GDP ( Â¶Âµ/Âµ ) is equal to 4.76 per cent. 207...
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 Fall '10
 Dr.DuMond
 Macroeconomics, Supply And Demand, Price point, Inverse demand function, Michael Carter, Foundations of Mathematical Economics

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