Suppose the hypothetical Kingdom of Macroland has 10 workers

Suppose the hypothetical Kingdom of Macroland has 10 workers in year 1, each working 50 weeks per year and 40 hours per week, and that labour productivity is $10 per hour. In year 2, worker hours equal 20,200, and productivity is $10.40 per hour. 12.1. What is Macroland\'s real GDP in year 1? Please enter a whole number, with no decimal point. Submit Answer Continue without saving

Solution

i ) Assume Year 1 as the base year for real GDP

So Base price = 10$ for hour

a) Quantity = Total workers x Work hours of each worker per hours x number of weeks

Q = 10 x 40x50 = 20000

RGDP = Q x Base price

RGDP in year 1 = 20000 x 10 = 200000$

b) Quanity = 20200 = 20200

RGDP in year 2 = 20200 x 10 = 202000$

c) % Increase = ( [ RGDP in year 2 / RGDP in year 1 ] - 1 ) x 100

% Increase = ( [ 202000 / 200000] - 1 ) x 100

% Increase = 1%

Economic growth from year 1 to year2 is 1%