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The RGDP per capita

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1.Assume last year's real GDP was \$7,000 billion, this year's nominal GDP is \$8,820 billion, and the GDP-deflator for this year is 120. What was the growth rate of real GDP? Does this show an improvement in economic welfare? (Clearly explain your answer)

2.Suppose the value of the French Franc in terms of the dollar is 50 on October 12 , and 44 on October 17.

By how much has the Franc appreciated or depreciated against the dollar?

3.Suppose the Value of French Franc in terms of the dollar is 40 on October 12 and 45 on October 17.
By how much has the Franc appreciated or depreciated against the dollar?

Fill in the Blanks

4. A --------------------in the exchange rate makes imported goods and services more expensive in the US. Producers may then pass on higher costs of imported components and raw materials onto consumers. This causes extra --------------- ----------------- inflation (identify the type of inflation to fill in the blank). Wages may rise in response to this, thus triggering off the possibility of a wage-price spiral.

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Solution Preview

1.Assume last year's real GDP was \$7,000 billion, this year's nominal GDP is \$8,820 billion, and the GDP-deflator for this year is 120. What was the growth rate of real GDP? Does this show an improvement in economic welfare? (Clearly explain your answer)

RGDP(1) = [NGDP(1)/GDP-deflator]*100
RGDP(1) = [8,820/120]*100
RGDP(1) = 7,350

Now, since the RGDP(0) is 7,000, the growth rate of the RGDP is:
y = [7,350 - 7,000]/7,000
y = 0.05
y = 5%

The RGDP per capita does not account for changes in ...

Solution Summary

The RGDP per capita is explained.

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