1. The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.
Year Nominal GDP Billions, Price Index (1996 = 100) Real GDP, Billions
1960 $ 527.4 22.19 $____
1968 911.5 26.29 $____
1978 2295.9 48.22 $____
1988 4742.5 80.22 $____
1998 8790.2 103.22 $____

2.

Suppose an economy's real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita?

3. If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation? What is the "rule of 70"? How long would it take for the price level to double if inflation persisted at (a) 2, (b) 5, and (c) 10 percent per year?

4. Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment.
Product Price Quality Demanded
$5 1
4 2
3 3
2 4
1 5

This solution shows step-by-step calculations to determine the real GDP, GDP per capita, price level and relationship of elasticity between the demand and the price changes.

... this economic forecast and the income elasticity of demand ... the demand of Gasoline as per GDP forecasts ...CPI- CONSUMER PRICE INDEX http://data.bls.gov/PDQ/servlet ...

... 1. perfectly elastic demand ... 3. monitor changes in the level of real GDP. ... NOTE: A consumer price index (CPI) measures changes through time in the price level of ...

... 100 $300 $300 Growth Rate of GDP per capita ...CPI Rate of Inflation = × 100 Previous Year CPI 121 - 110 ... Therefore, demand is elastic in the northwest segment of ...

... Year CPI GDP 2005 100 345 2006 126 349 2007 136 ... to compute the percent change in real GDP from 2006 ... is the base year, what was the Consumer Price Index in 2007 ...

...CPI is based on the prices of a "market basket ... The GDP deflator is the measure that uses the prices ... held constant when calculating an income elasticity of demand ...

... b. the price elasticity of supply. ... b. slow but positive growth of real GDP. ... Because the CPI is based on a fixed basket of goods, the introduction of new goods...

... inflation as measured by the consumer price index reflects the ... at http://data.worldbank. org/indicator/FP.CPI.TOTL.ZG ... data.worldbank.org/indicator/NY.GDP.MKTP.KD ...

... the highest correlation with liability claims (see Table 5). Looking at long-term elasticities, health expenditures ... Tort cost GL claims GDP CPI [med care]. ...

... more than expected growth in the GDP rate in the Asian region. ... on the consumer price index. ... The graph represents the price elasticity of demand for gas and oil ...