# Benjiland has a nominal GDP of 128 million in 2011 and 142 million in 2012. The price level in...

## Question:

Benjiland has a nominal GDP of 128 million in 2011 and 142 million in 2012. The price level in 2011 was 100 and in 2012 rose to 106.

a) What is real GDP for Benjiland in 2011?

b) Calculate real GDP for Benjiland in 2012.

c) Calculate the annual economic growth rate for Benjiland in 2012.

## Gross Domestic Product

The Gross Domestic Product (GDP) is the total output of all goods and services produced by the whole nation or country regardless of the business owner. GDP is one of the key economic metrics used by the government to measure the country's performance in one year.

## Answer and Explanation:

a) What is real GDP for Benjiland in 2011?

To compute for the real GDP:

{eq}Real~GDP~=~\frac{Nominal~GDP}{Price~Level}~*~100 {/eq}

{eq}Real~GDP~=~\frac{128}{100}~*~100 {/eq}

Benjiland's real GDP in 2011 is **128**

b) Calculate real GDP for Benjiland in 2012.

The same formula is to be used as the first question.

{eq}Real~GDP~=~\frac{Nominal~GDP}{Price~Level}~*~100 {/eq}

{eq}Real~GDP~=~\frac{142}{106}~*~100 {/eq}

Benjiland's real GDP in 2012 is **134**

c) Calculate the annual economic growth rate for Benjiland in 2012.

To compute for the annual rate:

{eq}\frac{Current~Year~GDP~-~Previous~Year~GDP}{Previous~Year~GDP} {/eq}

{eq}\frac{142~-~128}{128} {/eq}

The annual economic growth rate is **10.94%**

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from Economics 102: Macroeconomics

Chapter 4 / Lesson 3