Specimen multi choice question unit 3 Watch

tulip50
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Hi just doing the specimen paper for unit 3 and got stuck on the index number problem which is question 27. I can work out to get the right answer but does anyone have the right explanation as I am a bit stuck with it.
Also does anyone have any sample practice questions on index numbers
thanks
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NotKidding
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Could you include the question in your post?
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tulip50
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Hi should have thought of that




the answer is A

thanks
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NotKidding
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(Original post by tulip50)
Hi should have thought of that




the answer is A

thanks
This is a really bad question. Didn't really get it at first but here's what they've done:

GDP is +100%. Price level is +50%. Therefore, real GDP rise is 50%.
Population increase in +20%.
50-20 = 30% increase in real GDP per capita.
Therefore real GDP per capita goes from 100 index value to 130.
Population goes from 100 to 120.
30-20 = 10% increase.
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TeeEff
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(Original post by tulip50)
Hi should have thought of that




the answer is A

thanks
To start off, you can see from the table that nominal GDP has doubled between 2005 and 2014. You then need to consider both the increase in price level (to find the real growth in GDP) and the increase in population (to take population growth into consideration).

The price level has increased by 50%, so to work out what the growth was in terms of 2005 prices, you deflate the figure by your inflation. \frac{200}{1.5}=133.33..., which represents your increase in real GDP. In other words, your real GDP has grown by 33.33%.

Next, you take into account population growth, which is 20%, so that the increased population is discounted when working out the rise in GDP per Capita. \frac{133.33}{1.2}=111.1 hence real GDP per Capita has grown by approximately A. Hope that helps!
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Econ_James26
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Have you looked at this question again? Do you think 'The Financier' is correct? I came across this question this week and was slightly confused over how to get 'approximately' A. Thank you 😀
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Econ_James26
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(Original post by The Financier)
To start off, you can see from the table that nominal GDP has doubled between 2005 and 2014. You then need to consider both the increase in price level (to find the real growth in GDP) and the increase in population (to take population growth into consideration). % increase in real GDP = % increase in nominal GDP - % increase in price level ?

The price level has increased by 50%, so to work out what the growth was in terms of 2005 prices, you deflate the figure by your inflation. \frac{200}{1.5}=133.33..., which represents your increase in real GDP. In other words, your real GDP has grown by 33.33%.

Next, you take into account population growth, which is 20%, so that the increased population is discounted when working out the rise in GDP per Capita. \frac{133.33}{1.2}=111.1 hence real GDP per Capita has grown by approximately A. Hope that helps!
Hi 'The Financier'. Would the increase in real GDP not be 50%? Your calculations seem to suggest 33.33..%. I'm a bit confused. 😀 % increase in real GDP = % increase in nominal GDP - % increase in price level ?
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