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    GDP calculation and fixed exchange rate

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    Please provide a step by step explanation:

    a. Assume last year's real GDP was $10,000 billion, this year's nominal GDP is $13,800 billion, and the GDP-deflator for this year is 110. What was the growth rate of real GDP?

    b. "Under a fixed exchange rate system, expansionary monetary policy depletes foreign reserves at the central bank." Comment on this statement with the help of an IS-LM diagram.

    c. Using demand and supply analysis to assist you, what are the effects on the exchange rate between the British pound and the Japanese yen from:

    i. an increase in Japanese interest rates
    ii. an increase in the price of British goods
    iii. an increase in British interest rates.

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    Solution Summary

    The solution calculates GDP and fixed exchange rate.

    $2.19