Question

Sizing Up the Economy Using GDP — Work It Out

Answer 1

Answer:

a. Calculate the amount contributed by Ford to U.S. real and nominal GDP from the sales of the two models in 2016 and 2017.

Nominal GDP 2016:

F-series trucks = $44,400 x 820,799 trucks = $36,443.48 million

Escape SUVs = $24,485 x 307,069 SUVs = $7,518.58 million

total = $43,962.06 million

Nominal GDP 2017:

F-series trucks = $47,800 x 896,764 trucks = $42,865.32 million

Escape SUVs = $24,645 x 308,296 SUVs = $7,597.95 million

total = $50,463.27 million

since we are not given any base year, I will assume that 2016 is the base year:

Real GDP 2016:

F-series trucks = $36,443.48 million

Escape SUVs = $7,518.58 million

total = $43,962.06 million

Real GDP 2017:

F-series trucks = $44,400 x 896,764 trucks = $39,816.32 million

Escape SUVs = $24,485 x 308,296 SUVs = $7,548.63 million

total = $47,364.95 million

b. growth rate of nominal GDP = ($50,463.27 million - $43,962.06 million) / $43,962.06 million = 14.79%

c. growth rate of real GDP = ($47,364.95 million - $43,962.06 million) / $43,962.06 million = 7.74%

d. I do not know what you learned in class, we can use the GDP deflator to calculate inflation rate:

GDP deflator = nominal GDP / real GDP = $50,463.27 million / $47,364.95 million = 1.0654

inflation rate = (1.0654 - 1)/1 = 0.0654 = 6.54%

e. the increase in nominal GDP is due to a change in prices and quantity produced.