Calculating the real growth in GDP (1 Viewer)

[derek_]

i'm sure it's been asked before but i can't seem to find a recent thread with a similar question...so here one which i've got :/

Calculate the real growth in GDP in Year 3:

Year GDP CPI
1 525 100
2 600 110
3 750 125

thanks in advance

 

[masteraal]

well i think this is right but someone better check it

ok first u find the real GDP of yr 2

600 x (100/110)
thats 545.45454545

then real GDP of yr 3

750 x (100/125)

thats 600

so real gdp growth is 600-545.454545

equals

54.545455

this looks wrong but can someone check

 

[Sweet_Lemon]

dun't get how its calculated =.=|||

 

[miffytoki]

not sure if i can help but for the q:

Calculate the real growth in GDP in Year 3:

Year GDP CPI
1 525 100
2 600 110
3 750 125


i think u gotta calculate the real GDP for each year first (assuming the figures are nominal)...(calculate this figure by nominal GDP x 100/CPI) which'll be...(you can check these calculations..)

year Real GDP
1 525
2 545.45 (2 dec pl)
3 600

now to calculate GRowth...

i would do 100 x (600-545.45)/545.45 ...which'll give u a percentage of yr 3's growth on yr 2's.

i think this is right...this is a weird question anyway..this sorta question will only be in multiple choice or the 1 markers...they won't involve 2 calculations like this (????)...

 

[miffytoki]

woops forgot to post the answer... once to calculate the above formula...u should get 10% (1 dec Plc)

i agree with the first dude who posted up his answer he just forgot to divide it over the base year and times it by 100 i think...anyway i think my way is right...feel free to dispute anyone tho.

 

[derek_]

yeh this is the problem....this question is actually from the leading edge workbook chapter 7 q3(b) and from the online answers the do it differently :

the first value for CPI year 2 everyone has is perfect i.e.
600 x (100/110) = 545.45454545....

however, in the online answers, cpi year 3 is

750 x (110/125) = 660

therefore, real gdp for year 3 is (660 - 545.4545...)/545.4545 x 100/1 = 21% (the answer which they have on the leading edge website)

can anybody PLEASE explain who's wrong? the online answers or us ~

 

[aditya]

u know how u got 660... i get 652 :S

ohh i c my mistake... because i just took at has 15 :$ bloody idiot...

yeh ill explain y the book is right...


its teh change in CPI of the previous yr.. not from the base yr.. so since ur calculating from 2 - 3 basically you just consider the yr 2 cpi as the base yr... and as displayed [110/125 x100]... this gives u the increase in CPI which u must account the 750 for...

good question

 

[derek_]

thanks aditya, that explains it for me

at least if i get this in the hsc exam 'i'll be like yay something i can do!'

 

[miffytoki]

yeah thats right base year is last years..whoops

 

[aditya]

i wouldnt say that though.. that the base yr is the last year, i was just using it to explain it... the base yr is always wen its "100" or 1000 or 10000 in some cases (stock market or soethign)... so yeh dunt use that terminology

 

[i-color]

You guys should be careful in these questions. I always used to get them confused...you should ask your teacher because the formula for real GDP is

Real GDP = nominal GDP x base CPI/current CPI

Base CPI is always equal to 100.....so you would see in some textbooks that the formula is

Real GDP = Nominal GDP x 100/CPI

--> that's why i always got confused and didn't know if i'm meant to use the CPI from previous year or the base year CPI and I've forgotten what my teacher told me to do.....so should ask your teacher