ECON1000D, D02

Kimberly McCarten (101000176)

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CHAPTER 5; Question 5
Year
2008
2009
2010

Price of Milk
($)
1
1
2

Quantity of
Milk (litres)
100
200
200

Price of Honey
($)
2
2
4

Quantity of
Honey (litres)
50
100
100

A. Calculations (where * indicates multiplication, and the base year is 2008).

Nominal GDP- (2008) ($1*100)+($2*50)=$200
(2009) ($1*200)+($2*100)=$400
(2010) ($2*200)+($4*100)=$800
Real GDP- (2008)($1*100)+($2*50)=$200
(2009)($1*200)+($2*100)=$400
(2010) ($1*200)+($2*100)=$400
In these calculation, the price data is taken from our base year (2008). This is
because real GDP calculates the production of goods and services valued at a
constant price, so the price from the first year is then applied to future years as
well.
GDP Deflator- (2008) ($200/$200)*100= 100
(2009) ($400/$400)*100=100
(2010) ($800/$400)*100=200
(Nominal GDP/Real GDP*100)
B. Calculations (for the years 2009-2010- based on inflation formula).
Nominal GDP- (2009) [(400-200)/200]*100= 100 (100%)
(2010) [(800-400)/400]*100= 100 (100%)
Real GDP- (2009) [(400-200)/200]*100=100 (100%)
(2010) [(400-400)/400]*100=0 (0%)
The level of outputs seen in year 2009-2010 remained constant-and did not
change. As a result, the percentage of the Real GDP seen in 2010 is 0%. This
makes sense, because when there is no increase or decrease in the production
levels, it is impossible to see a percentage change.
GDP Deflator- (2009)[(100-100)/100]*100=0 (0%)
(2010) [(200-100)/100]*100=100 (100%)

ECON1000D, D02
Kimberly McCarten (101000176)
____________________________________________________________
Going further, the prices also did not change from 2008-2009- and also
remained constant. As a result, the GDP Deflators percentage seen in 2009 is also
0%. This again makes sense, because percentage change is impossible to calculate
when there is no increase or decrease.
C. The economic well-being rises more in 2009 rather than in 2010. This is because
the real GDP only rose in 2009. In 2010, the prices rose but the GDP did not. In
2009, the real GDP rose and the prices did not. This ultimately means that things
were cheaper for the same quantity in 2009- and the economic well being rose in
2009, rather than 2010.
CHAPTER 6; Question 4
Karaoke Machines
2011
2012

Quantity
10
12

Price ($)
40
60

CDs
Quantity
30
50

Price ($)
10
12