Ok so this probably seems easy but I am not sure how to work these. We are given a table with data
Price Paper Price
2010 2 100 2.5
2011 3 125 3
2012 4 150 3.5
we are usig 2011 as base year
a) what is nomial GDP?
b) Real GDP?
c) GDP Price Index
d) CPI
Is nomial just multiplying the 2 numbers?
Price index divide by base year and multiply by 100?
I am not sure how to determine the others.
Thanks for any help?
No problem! I can help you with that.
a) Nominal GDP is the total value of goods and services produced in an economy, measured at current market prices. To calculate nominal GDP, you need to multiply the quantity of each good or service produced (in this case, the "Paper" column) by its corresponding price (in this case, the "Price" column). Then, sum up all the values for each year. So for example, in 2010, the nominal GDP would be 2 x 100 = 200, in 2011 it would be 3 x 125 = 375, and so on.
b) Real GDP is the total value of goods and services produced in an economy, adjusted for inflation. To calculate real GDP, we need to use a price index. In this case, you will use the GDP price index. The formula for real GDP is: Real GDP = Nominal GDP / GDP Price Index. The GDP Price Index measures the average change in the prices of goods and services over time. In order to calculate the GDP Price Index, you need to determine the price level for the base year (in this case, 2011) and divide it by the price level for each subsequent year. So, for example, the GDP Price Index for 2010 would be 2.5 / 3 x 100 = 83.33, for 2012 it would be 3.5 / 3 x 100 = 116.67.
c) The GDP Price Index (also known as the GDP deflator) is a measure of the average price level of all the goods and services produced in an economy. It indicates the extent of inflation or deflation in the economy. As mentioned earlier, you can calculate the GDP Price Index by dividing the price level for each year by the price level of the base year and multiplying by 100. This will give you a percentage that represents the change in prices relative to the base year.
d) The CPI (Consumer Price Index) is a measure of the average price level for goods and services purchased by households. It provides an indication of inflation or deflation specifically for consumers. To calculate the CPI, you would typically use a different basket of goods and services than the one used for the GDP Price Index. It is computed by comparing the price level of the basket of goods and services for each year to the price level of the same basket in the base year. However, based on the information given, it seems like you don't have the necessary data to calculate the CPI.
I hope this helps! Let me know if you have any further questions.