Suppose the information in the following table is for a simp

Suppose the information in the following table is for a simple economy that produces only the following four goods: shoes, hamburgers, shirts, and cotton. Further, assume that all of the cotton is used to produce shirts 2009 Statistics 2018 Statistics 2019 Statistics Price Quantity Price 110 S70.00 120 2.25 85 35.00 0.80 QuantityPice Quantity Product Shoes Hamburgers Shirts Cotton 100 $52.00 75 2.00 70 40.00 12,000 0.90 100 60 12,000 115 $65.00 2.00 35.00 0.75 13,000 a. If the base year is the year 2009, then real GDP for 2018 equals S(round your answer to the nearest penny) and the real GDP for 2019 equals (round your answer to the nearest penny) %. Enter your response as a percentage rounded to wo decimal places. b. The annual growth rate of real GDP in 2019 is

Solution

A. Real GDP can be calculated using the price in the base year and quantity in the current year.

Real GDP in 2018 = 115 * $52 + 100 * $2 + 60 * $40 + 12,000 * $0.90 = $5,980 + $200 + $2,400 + $10,800 = $19,380.

Real GDP in 2019 = 110 * $52 + 120 * $2 + 85 * $40 + 13,000 * $0.90 = $5,720 + $240 + $3,400 + $11,700 = $21,060.

The % growth in real GDP in 2019 = ($21,060 - $19,380)/$19,380 * 100 = $1,680/$19,380 * 100 = 0.0867 * 100 = 8.67%