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Nominal and real GDP The accompanying table shows data on nominal GDP (in billions of dollars),...

Nominal and real GDP
The accompanying table shows data on nominal GDP (in billions of dollars), real GDP (in billions of 2007 dollars), and population (in thousands) of Canada in 1966, 1976, 1986, 1996, 2006, and 2016. The Canadian price level rose consistently over the period 1966–2016.

Year nominal GDP ( billions of dollars) real GDPBILLIONS OF 2007 DOLLARS POPULATION thousands
1966 64.8 431.9 19998
1976 200 658 23414
1986 524.5 897 26067
1996 857 1104.3 29570
2006 1492.2 1541.7 32529
2016 2027.5 1796.2 36229

a. Why is real GDP greater than nominal GDP for all years until 2006 and lower for 2016?
b. Calculate the percent change in real GDP from 1966 to 1976, 1976 to 1986, 1986 to 1996, 1996 to 2006, and 2006 to 2016. Which period had the highest growth rate?

c. Calculate real GDP per capita for each of the years in the table.

d. Calculate the percent change in real GDP per capita from 1966 to 1976, 1976 to 1986, 1986 to 1996, 1996 to 2006, and 2006 to 2016. Which period had the highest growth rate?
e. How do the percent change in real GDP and the percent change in real GDP per capita compare? Which is larger? Do we expect them to have this relationship?

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Answer #1

a) The main reason for real GDP to be greater than nominal GDP for all years until 2006 is that the price levels in every year are very less compared to the base price year. In 2016 the price level went up where the from 2006-2016 which made the Nominal GDP greater than Real GDP for that period.

b)

% Change =( (New value/Old value )-1)*100

% Change in real GDP from 1966-1976 =( (Real GDP in( 1976/1966))-1)*100

Year RGDP % Change in real GDP
1966 431.9 -
1976 658 ((658/431.9)-1)*100 = 52.35%
1986 897 ((897/658)-1)*100 = 36.32%
1996 1104.3 ((1104.3/897)-1)*100 = 23.11%
2006 1541.7 39.6%
2016 1796.2 16.5%

C & D)

GDP per capita = GDP/ Population

Year RGDP in thousand of dollars Population RGDP per capita = RGDP/ Population % Change in RGD per capita
1966 431.9*106 19998 (431.9*10/19998) = 21597.16$ -
1976 658*10 23414 $28102.84

((28102.84/21597.16)-1)*100

= 30.12%

1986 897*10 26067 $34411.32 22.45%
1996 1104.3*10 29570 $37345.28 8.52%
2006 1541.7*10 32529 $47394.62 26.9
2016 1796..2*10 36229 $49579.1 4.6%
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