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