Econ 1101 Macro Principles-Lecture-Kelly-Spring 2024 Mallika Khurana @ e e R R P g Question 13, Text Problem 13 N HW Score: 22.22%, 4 of 18 points USR] QO Points: 00f 3 | 9 Recall the method of calculating real GDP detailed in the chapter. As you may already have noticed, this method has a problem: in calculating aggregate output, this method weights the output of the various goods and services by their relative prices in the base year. =t Say, for example, a textbook costs $100 in the base year, and a laptop costs $2,000. This means that the laptop would have 20 times the weight of a book in calculating aggregate output. But what happens when relative prices change? As you know, the prices of most high-tech items, including laptops, have generally been decreasing over time. Suppose the price of a laptop declined from $2,000 to $1,000 in the period O from the base year to the current year. Now, a laptop costs only 10 times as much as the book. So, using base-year relative prices would overweight laptops in calculating real GDP in the current year. In response to this problem, in 1996 the BEA switched to what is called a chain-weighted method of calculating real GDP. Say the base year is 2008. To calculate the growth rate of real GDP between 2008 and 2009, for example, the BEA calculates real GDP for 2008 using 2008 as the base, and then real GDP for 2008 using 2009 as the base. Then, the bureau calculates real GDP for 2009 using 2009 as the base, and real GDP for 2009 using 2008 as the base. For O each base, the growth rate is then calculated as: 2009 GDP (3005 ase) ~ 2008 GDP 2995 gase) 2009 GDP (3999 pase) ~ 2008 GDP 2099 gase) and 2008 GDP (200 gase) 2008 GDP (2009 gase) So, they end up with two different growth rates, which are then averaged. Given this averaged growth rate, and the level of GDP in 2008 at 2008 prices, the bureau then calculates real GDP for 2009 as one plus the average growth rate previously calculated, times 2008 output in 2008 dollars. The growth rate between 2009 and 2010 is then calculated similarly. O Suppose that laptops, economics textbooks, and energy drinks are the only three goods produced in the United States. The following table gives the quantity of each produced (in millions) and their price in the years from 2019 to 2021: Laptops Textbooks Energy Drinks o Price Quantity Price Quantity Price Quantity 2019 $1,700 8 $170 6 $4 25 2020 $1,400 10 $180 8 $6 30 O 2021 $1,200 10 $200 9 $6 35 Complete the following table by calculating nominal GDP and real GDP (using 2019 as the base year) for each year. (Enter your responses as integers.) Nominal GDP Real GDP 3919 gase) 2019 $ $ 2020 $ $ 2021 $) $ Help me solve this Etext pages Get more help Safari File Edit View History Bookmarks Window Help G () Q % Fri Feb 23 12:39 AM ... coursehero.com + P mylab.pearson.com Canvas UT Austin Search Result.. Course Hero Wordle DRIVE P Course Home > > Econ 1101 Macro Principles-Lecture-Kelly-Spring 2024 Courses Course Hero ChatGPT G The national incom.. ... jessapacquiao Question 13, HW Score: Active 22 seconds ago E Homework: HW 4 Text Problem 34.03%, 6.13 GDP-Spring 2024 13 of 18 points Part 1 of 3 O Points: 0 Save of 3 The following table shows the nominal GDP and real GDP (using 2019 as the base year) for each year from 2019 to 2021: X One or more of your responses is incorrect. Year Nominal GDP Real GDP (2019) 2019 $17,860 million $17,860 million Nominal GDP for any year is found by multiplying price times quantity for each product and then summing across all products: 2020 $19,600 million $18,500 million Nominal GDP = (P1 X Q1 ) + (P2 x Q2) + . . . + (Pnx Qn), 2021 $20,400 million $18,100 million where n is the number of products in the economy. Real GDP for any year is found by multiplying the base year price (Ppase) times quantity or each product and then summing across all products: As you can see, the nominal GDP increases each year, while Real GDP = (PRase x Q1) + (phase x Q2) + . . . + (phase x On) the real GDP decreases slightly. This is because the prices of laptops and textbooks have decreased, while the quantity of all where n is the number of products in the economy. three goods has increased. The decrease in prices outweighs the increase in quantity, resulting in a decrease in real GDP. OK Explanation: The passage describes the concept of real GDP and nominal GDP. It also explains the chain-weighted method of calculating O 2021 $ 20400 $ 18100 real GDP. Nominal GDP is the total monetary value of all final goods and Get more help - Clear all Check answer services produced in an economy in a given year, valued at Question Viewer current market prices. Real GDP is the total monetary value of all final goods and 44 1,362 FEB AFK Area 23 tv