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1)estion 2 an investment account gives to interest annually, how much equal annual deposits you have to make for 10 years starting year 1 to have a $250

Economics Oct 10, 2020

1)estion 2 an investment account gives to interest annually, how much equal annual deposits you have to make for 10 years starting year 1 to have a $250.649 at your account at the end of this investment.

2)A company purchased a quality control system for $39,806 which requires $9,568 per year maintenance fees for the first 5 years, after which the maintenance fees will increase by 12% per year for the upcoming 7 years. Determine the equivalent total present worth value of preached system during the 12 years operation at i = 15% per year.

3)Historically, real GDP has increased less rapidly than nominal GDP because

Multiple Choice

  • the general price level has increased.

  • the general price level has decreased.

  • price indices have not reflected improvements in product quality.

  • technological progress has resulted in more efficient production

Expert Solution

Please use this google drive link to download the answer file.       

answer 1.https://drive.google.com/file/d/12XO5z_oFKUTWiGGM1Is7ivV_9GfBEn0L/view?usp=sharing

answer 3https://drive.google.com/file/d/1Yaz4Kj1R39VGqI0_FErw3xyb9fFVd7lf/view?usp=sharing.

Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process. 

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2)PW = -39806 + 9568 (P/a ,15%, 12) + (9568 * 0.12) (p/f, 15%,7)
PW = -39806 - 9856 * 5.4206 - 1148.16 * 10.19
PW = 104,931.18.

3)According to the question, we have been asked about the reason for real GDP increasing less rapidly than nominal GDP.

Historically, real GDP has increased less rapidly than nominal GDP because the general price level has increased.

To understand this, we need to understand the following terms:

1) Real GDP: Real Gross Development Product is basically a macroeconomics concept which measures value of economic output adjusted for price changes (i.e., inflation or deflation).

2) Nominal GDP: Nominal Gross Development Product includes assessing economic production in an economy and normally it involves current prices of goods and services.

3) Deflator: It is a measure of level of prices of all new, domestically produced goods and services in an economic year.

We can depict these two in formula as follows:

Real GDP=Nominal GDP/Deflator

The following graph shows the difference between Nominal and real GDP in US from 2012 to 2019.

So, Real GDP has increased less rapidly than nominal GDP because of increase in price level.

We can see in the formula, Real GDP is calculated by dividing the nominal GDP with Deflator i.e., price level. So price level is inversely proportional to Real GDP. Thus, increase in Deflator will decrease the real GDP. Thus increase in price level has resulted in less increase in real GDP than nominal GDP.

Thus other options are irrelevant according to the question. Thus, the correct answer will be 'the general price level has increased'.please see the link.

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