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Gross Domestic Product Calculations and Trends

Question One
1. Calculate the real GDP for 2005 and 2006 using 2005 prices
2005:
(90 X $18) + (180 X $100) = 1,620 + 18,000 = 19,620
2006:
(100 X $18) + (190 X $100) = 1,800 + 19,000 = 20,800

2. Calculate by what percentage did the real GDP grow
20,800 – 19,620 = 1,180 / 19,620 = 0.0601 X 100 = 6.01%

Question Two
1. Calculate the value of the price index for GDP for 2006 using 2005 as the base year
[(90 X 20) + (180 X 110)] / [(90 X 18) + (180 X 100)] X 100
[1,800 + 19,800 = 21,600] / [1,620 + 18,000 = 19,620]
21,600 / 19,620 = 1.10 X 100 = 110.09

2. By what percent did the price increase = 1.10%

Question Three
1. Calculate the real GDP for 2005 and 2006 using 2006 prices
2005:
(90 X 20) + (180 X 110) = 1,800 + 19,800 = 21,600
2006:
(100 X 20) + (190 X 110) = 2,000 + 20,900 = 22,900

2. By what percent did real GDP grow
22,900 – 21,600 = 1,300 / 21,600 X 100 = 6.01%

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Approximate Word Count: 434
Approximate Pages: 2 (250 words per double-spaced page)

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