Problem:
Use the following data to answer questions 1-3 (be sure to provide all calculations).
Quantities Produced Prices
CDs Tennis Racquets CDs Tennis Racquets
Year 2004 100 200 20 110
Year 2005 120 210 22 120
Question 1. Calculate real GDP for 2004 and 2005 using 2004 prices. By what percent did real GDP grow?
Question 2. Calculate the value of the price index for GDP for 2005 using 2004 as the base year. By what percent did prices increase?
Question 3. Now calculate real GDP for 2004 and 2005 using 2005 prices. By what percent did real GDP grow?
Question 4. Review the GDP information for the past few years from the Bureau of Economic Analysis's Website. Provide a brief summary of the GDP trends over that timeframe and discuss two or three events which may have caused these trends