In 2022 a certain small economy recorded nominal GDP equal to $ 125 897. The GDP deflator in 2022 was equal to 1,09. In 2021 the value of the GDP deflator was 1,06. The value of real GDP did not increase from 2021 to 2022. Which one of the following statements is correct? / *In 2022 het 'n sekere klein ekonomie nominale BBP gelykstaande aan $ 125 897 aangeteken. Die BBP-deflator in 2022 was gelyk aan 1,09. In 2021 was die waarde van die BBP-deflator 1,06. Die waarde van reële BBP het nie van 2021 tot 2022 toegeneem nie. Watter een van die volgende stellings is korrek?*

Question 10Answer

a.

The value of real GDP in 2022 was $ 137 227,73. / D*ie waarde van die reële BBP in 2022 was $ 137 227,73.*

b.

The value of real GDP in 2022 was $ 115 502. / *Die waarde van die reële BBP in 2022 was $ 115 502.*
 
c.

The inflation rate in 2022 was 5%. / *Die inflasiekoers in 2022 was 5%.*

d.

The inflation rate in 2022 was 9%. / *Die inflasiekoers in 2022 was 9%.*

To solve this problem, let's analyze the given data and understand the concepts involved:

1. **Nominal GDP in 2022:** $125,897
2. **GDP deflator in 2022:** 1.09
3. **GDP deflator in 2021:** 1.06
4. **Real GDP did not increase from 2021 to 2022.**

### Step 1: Calculate Real GDP in 2022
The formula to calculate real GDP is:
\[
\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP deflator}}
\]

Substitute the values for 2022:
\[
\text{Real GDP in 2022} = \frac{125,897}{1.09} \approx 115,502
\]

This confirms that the value of real GDP in 2022 is approximately $115,502.

### Step 2: Calculate the Inflation Rate for 2022
The inflation rate can be calculated using the GDP deflator values from 2021 and 2022:
\[
\text{Inflation rate} = \frac{\text{GDP deflator in 2022} - \text{GDP deflator in 2021}}{\text{GDP deflator in 2021}} \times 100
\]
\[
\text{Inflation rate} = \frac{1.09 - 1.06}{1.06} \times 100 \approx 2.83\%
\]

### Evaluating the Options:
- **Option (a):** "The value of real GDP in 2022 was $137,227.73."  
   This is incorrect, as we calculated the real GDP to be approximately $115,502.

- **Option (b):** "The value of real GDP in 2022 was $115,502."  
   This is correct, as calculated.

- **Option (c):** "The inflation rate in 2022 was 5%."  
   This is incorrect; the inflation rate was approximately 2.83%.

- **Option (d):** "The inflation rate in 2022 was 9%."  
   This is also incorrect.

### Correct Answer:
**Option (b): The value of real GDP in 2022 was $115,502.**

Would you like further clarification on any of the steps? Here are five related questions for further exploration:
1. How is the GDP deflator used to adjust nominal GDP to real GDP?
2. What are the differences between the GDP deflator and the Consumer Price Index (CPI) for measuring inflation?
3. How can real GDP growth be interpreted in terms of economic development?
4. What factors could cause the GDP deflator to increase over time?
5. How does nominal GDP differ from real GDP in terms of reflecting economic growth?

**Tip:** When adjusting for inflation, always use the formula $\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP deflator}}$, ensuring the deflator is in decimal form (e.g., 1.09

In 2022 a certain small economy recorded nominal GDP equal to $ 125 897. The GDP deflator in 2022 was equal to 1.09. In 2021 the value of the GDP deflator was 1.06. The value of real GDP did not increase from 2021 to 2022. Which one of the following statements is correct?

Learn how to calculate the real GDP and inflation for a small economy in 2022 using the GDP deflator. This problem covers economic concepts like nominal GDP, real GDP, and inflation rate, with step-by-step calculations and detailed explanations.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation