Summary of the GDP trends

This posting answers these inquiries:

1. Calculate real GDP for 2004 and 2005 using 2004 prices. By what percent did real GDP grow?
2. Calculate the value of the price index for GDP for 2005 using 2004 as the base year. By what percent did prices increase?
3. Now calculate real GDP for 2004 and 2005 using 2005 prices. By what percent did real GDP grow?
4. Review the GDP information for the past few years from the Bureau of Economic Analysis's Website. Provide a brief summary of the GDP trends over that timeframe and discuss two or three events which may have caused these trends.

Answer:
1. Calculate real GDP for 2004 and 2005 using 2004 prices. By what percent did real GDP grow?
(2004) 100*20=2000 and 200*110=22,000
(2005) 120*20=2,400 and 210*110=23,100
(2004) 22,000+2000=24,000
(2005) 23,100+2400=25,500
Growth 25,500-24,200=1,1500
Real GDP grew by %
2. Calculate the value of the price index for GDP for 2005 using 2004 as the base year. By what percent did prices increase?
Value of GDP in 2005=100*[(Nominal GDP in 2005)/(real GDP in 2004)]
100*(27,840/26,200)=100*164= 16.4 is the price increase

3. Now calculate real GDP for 2004 and 2005 using 2005 prices. By what percent did real GDP grow?
(2004) 100*22=2200 and 200*120=24,000
(2005) 120*22=2,640 and 210*120=25,200
(2004) 24,000+2200=26,200
(2005) 25,200+2640=27,840
Growth 27,840-26,200=1,640
Real GDP grew by 16.4 %

4. Review the GDP information for the past few years from the Bureau of Economic Analysis's Website. Provide a brief summary of the GDP trends over that timeframe and discuss two or three events which may have caused these trends.

In our highly globalize world, every nation relies on money as part of its own form of economic system. Businesses, both foreign and domestic, play an eminent role in world economy. The ability to export and import is extremely important for maintaining economic stability. International trade allows Americans the ability to drive foreign cars, wear Italian suits, and drink fine wines from France. While Americans enjoy these luxuries, international products also help to maintain jobs in other countries. This exchange also occurs in foreign countries with American goods.

S. INTERNATIONAL TRADE IN GOODS AND SERVICES and Corporate Profits
were the two GDP trends that were of more interested to me. International was chosen due to the number of America businesses sending jobs to other countries, I was sure to find a big rise in the goods and services. As for Corporate Profits, I chose it because I have been a part of the corporate world for about 20 years and has had the opportunity to witness the ups and down of corporate.

The trends located with S. International Trade in goods and services were similar to those of Corporate Profits. For example; S. International experienced deficit in the first half of the year. Exports of goods and services averaged $121.1 billion, while imports of goods and services averaged $188.7 billion, resulting in an average trade deficit of $67.6 billion. Not every division within S. International experienced a downfall. On the other hand, Corporate Profits saw more gains than S. International Trades. Each experienced its ups and downs. One has to review each event separately in order to really determine the overall profits of each service.

Bureau of Economic Analysis (2006). U.S.Department of Commerce Bureau of Economic Analysis. Retrieved October 23, 2006, from http://www.bea.gov/
Sheffrin and Sullivan, (2006). Economics Principles & Tools. Pearson Education, Inc., Upper Saddle River, New Jersey.