# Quantitative Reasoning Explanations

Show your work at the end of the problems (Excel functions count as work but must be visible from the cell)

The following table shows a 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.

1 Year Nominal GDP, $B Price Index Real GDP, $B

(1996 = 100)

1960 527.4 22.19 $x x

1968 911.5 26.29 $x x

1978 2295.9 48.22 $x x

1988 4742.5 80.22 $x x

1998 8790.2 103.22 $x x

Suppose an economy's real GDP is $30,000 in year 1 and $31,200 in year 2.

2 What is the growth rate of its real GDP? x

3 Assume that population is 100 in year 1 and 102 in year 2.

What is the growth rate of GDP per capita? x

If the CPI was 110 last year and is 121 this year

4 What is this year's rate of inflation? x

5 Describe in words - what is the "rule of 70"? x

6 How long would it take for the price level to double if inflation persisted at

2% per year x

5% per year x

10% per year x

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#### Solution Preview

quantitative reasoning

Show your work at the end of the problems (Excel functions count as work but must be visible from the cell)

The following table shows a 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.

1 Year Nominal GDP, $B Price Index Real GDP, $B

(1996 = 100)

1960 527.4 22.19 $x x

1968 911.5 26.29 $x x

1978 2295.9 48.22 $x x

1988 4742.5 80.22 $x x

1998 8790.2 103.22 ...

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