Economics Terms Exercise - GDP

Imagine an economy that produces two goods (A and B) over a period of three years, from 2018 (base year) to 2020. The realized prices (P) and quantities (Q) are as follows:

	2018 (base)		2019		2020
	P	Q	P	Q	P	Q
Good A	€100	800	€102	840	€107	815
Good B	€500	40	€510	42	€536	41

 

 

 

 

 

Use the above information to complete the table below:

	2018 (base)	2019	2020
1) Nominal GDP (current prices)	€100,000		€109,181
2) Real GDP (constant 2008 prices)	€100,000	€105,000
3) Annual real GDP growth (%)			-3%

 

 

 

 

 

 

• See the solution

  	2018 (base)	2019	2020
  1) Nominal GDP (current prices)	€100,000	€107,100	€109,181
  2) Real GDP (constant 2018 prices)	€100,000	€105,000	€102,000
  3) Annual real GDP growth (%)		5%	-3%

   

   

   

   

   

   

   

   

  1) GDP₂₀₁₉ = ∑ (P₂₀₁₉ * Q₂₀₁₉) = €102 * 840 + €510 * 42 = €107,100

  2) realGDP₂₀₂₀ = ∑ (P₂₀₁₈ * Q₂₀₂₀) = €100 * 815 + €500 * 41 = €102,000

  3) Growth₂₀₁₉ = (realGDP₂₀₁₉ ─ realGDP₂₀₁₈) / GDP₂₀₁₈ = (€105,000 ─ €100,000) / €100,000 = 0.05

 

 

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