Use the following data to answer questions 1-3 (be sure to provide all calculations).

Calculating Real Gross Domestic Product (GDP ) and the GDP Price Index

Year

2005 2006

Prices

CD 's 18 20

Tennis R 100 110

Quantities

CD 's 90 100

Tennis R 180 190 Growth of rGDP in 2005 using 2005 prices 0 Growth of rGDP in 2006 using 2005 prices 6 .0143

price index for GDP for 2006 using 2005 as the base year 110 .0917 Growth of rGDP in 2005 using 2006 prices 6 .0185 Growth of rGDP in 2006 using 2006 prices 0

Table 1 . GDP and GDP Price

Index for the year 2005-2006

Computation (p - price q- quantity 0 Growth of rGDP in 2006 using 2005 prices [ 18 100 100 190 ) ch 100 90 100 180 )] X 100 6 .0143

price index for GDP for 2006 using 2005 (cost of buying base-year 's GDP at 2006 prices ) ch (cost of buying 2005 's GDP at 2005 prices ) X 100 ?p2006q2005 ?pq )] X 100 [ 20 90 100 180 )] / [ 18 90 100 180 )2005 20 100 110 190 )] X 100 110 .0917 Growth of rGDP in 2006 using 2006 prices [ ?p2006q2006 ?p2006q2006 )] - 1 0 [ 20 100 110 190 ) ch 20 90 100 180 )] - 1 6 .0185

In the year 2003 , by third quarter of the year , US reach the towering growth rate of Gross Domestic Product amounting to about 7 .4 increased in GDP . The four quarters in the year 2004 , has a little discrepancy in the rate increase of GDP . The rate ranges from 2 .5 - 4 . The conditions of the quarter-to-quarter growth in real GDP is almost the same in trend as the previous years reaching 4 .2 as the highest growth rate in the year . In the year 2005 , US Real GDP growth has increased to 4 .1 by third quarter and eventually dropped to 1 .8 at the end of the quarter ADDIN EN .CITE Metrics 2 .3Metrics 2 .0 ,GDP Growth Revised Up to 2 .2 in 3Q 2006 Corporate Profits Jump 30 .9 200613 August 2007http /www .metri cs2 .com /blog /2006 /11 /29 /gdp_growth_revised_up_to_22_in_3q_2006_corporate _p .html (Metrics 2 .0 , 2006

The soaring of the growth rate of US Real GDP was due to several factors . Some of these include market value of the nation 's output of goods and services and employment . The value of US dollar stride relative to other countries due to national growth in productivity Increasing productivity allows reducing price of all commodities . The labor employment also stabilizes US economy . The more the employment the more products to be produced

Reference

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http /www .metrics2 .com /blog /2006 /11 /29 /gdp_growth_revised_up_to_22_in_ 3q_2006_corporate_p .html PAGE

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