Assume an Economy Produces Just Cars and Computers; Use the Information

question 36

Essay

Assume an economy produces just cars and computers; use the information in the table below to answer the following questions about the GDP.
$$\begin{array} { | l | l | l | l | l | } \hline & { \text { Cars } } & & { \text { Camputers } } \\\hline \text { Year } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \\\hline 2018 & 100 & \$ 10,000 & 1,000 & \$ 1,000 \\\hline 2019 & 110 & \$ 12,000 & 1,100 & \$ 900 \\\hline\end{array}$$ (1) Calculate nominal GDP in 2018 and 2019.What is the growth rate in nominal GDP?
(2) Using 2018 as a base year, calculate real GDP in 2019.What is the growth rate in real GDP?
(3) Calculate the GDP deflator in 2019.

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Definitions:

Required Accounting Return

The minimum return that a company needs to achieve on its investments based on accounting principles, to satisfy stakeholders or internal benchmarks.

Depreciated Straight-line

A method of calculating depreciation by equally spreading the cost of an asset over its useful life.

Book Value

The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

Profitability Index

A financial metric that measures the profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.