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Homework answers / question archive / Consider an economy that produces only two goods, soft drinks and hamburgers

Consider an economy that produces only two goods, soft drinks and hamburgers

Economics

Consider an economy that produces only two goods, soft drinks and hamburgers. The following price and quantity statistics are available about this economy:

Year

Hamburgers

Soft Drinks

2015

Price = $2.00; Quantity = 2000

Price = $0.50; Quantity = 2000

2016

Price = $2.25; Quantity = 2000

Price = $0.50; Quantity = 2200

 

Taking 2015 as the base year, find the growth rate of the constant-price GDP in 2016. Round to the nearest whole percent and enter just the number with no symbols.

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Computation of Growth Rate of the Constant-Price GDP in 2016:

RGDP 2015 = (2000*$2) + (2000*$0.5)

= $4,000 + $1,000

= $5,000

 

RGDP in year 2016 is calculated on the base year prices that is 2015 year prices:

RGDP 2016 = (2000*$2) + (2200*$0.5)

= $4,000 + $1,100

= $5,100

 

Growth Rate of GDP = (GDP 2016 - GDP 2015)/GDP 2015 * 100

= ($5,100 - $5,000)/$5,000 * 100

Growth Rate of GDP = 2%

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