Polonia produces two goods - X and Y. The quantity produced of the two goods and their prices in two different years are given in the table below:
Year Good X Price Good X Quantity Good Y Price Good Y Quantity
1 $10 100 $12 250
2 $25 120 $22 300
i) Calculate the real GDP of Polonia in Year 2 taking Year 1 as the base year.
ii) What is the growth rate of Polonia's real GDP between Year 1 and Year 2?
i) Real GDP is the total value of a country's output using base year prices. In this case, the base year is Year 1. Therefore, real GDP of Polonia in Year 2 is 120 × $10 + 300 × $12 = $1,200 + $3,600 = $4,800.
ii) Polonia's real GDP for Year 1 is 100 × $10 + 250 × $12 = $1,000 + $3,000 = $4,000 and for Year 2 is $4,800. The growth rate of Polonia's GDP is ($4,800 - $4,000)/$4,000 = 0.2 or 20%.
You might also like to view...
A positive statement i. makes a statement about how the world operates. ii. is a true statement. iii. can be tested against the facts
A) i and ii B) i and iii C) ii and iii D) i, ii and iii E) i only
Which of the following correctly identifies characteristics of land and capital?
A) Land and capital can both be rented and owned. B) Land is rented, whereas capital is owned. C) Land can be owned or rented, whereas capital can only be owned by a firm. D) Capital can be owned or rented by a firm, whereas land can only be owned by a firm.
Compared to the purely competitive firm, a pure monopoly:
A. will always become competitive in the long run because positive economic profits will induce competitors into the market. B. is efficient from society's perspective because it has big plants and it uses the newest possible production technology. C. is able to use barriers to entry and maintain positive economic profits in the long run. D. produces an equal amount of output but charges higher prices to cover all costs in the market.
In labor markets, the substitution effect occurs when
A. a change in the price of a substitute input reduces the cost of capital. B. a substitute good also functions as a complement. C. the cost of production falls enough that the firm will produce a larger amount of output. D. a change in the price of a substitute input causes the demand for labor to change in the same direction.