Help with macroeconomic

label Economics
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Consumption in year three is $200, investment in year three is $100, government spending in year three is $150, exports in year three are $100, imports in year three are $50. Prices for everything in year one are $20, in year two prices for everything are $28, in year three prices for everything are $35. What will the size of real GDP be for year three?

A) 
B) 
C) 
D) 
E) 
Aug 10th, 2015

Thank you for the opportunity to help you with your question!

nominal GDP = private consumption + gross investment + government investment + government spending + (exports -   imports).

=200+150+ 100-50 = 400

Real GDP=GDP*inflation


Please let me know if you need any clarification. I'm always happy to answer your questions.
Aug 10th, 2015

Kindly allow me to finish for real GDP

Aug 10th, 2015

REAL GDP =NOMINAL GDP /DEFLATOR

DEFLATOR = 1+INFLATION RATE =(35-20)/20 =15/20 =75%IN 2 YEARS.

INFLATION = 37.5%

DEFLATOR=1+37.5% =1.375

REAL GDP=400/1.375= 290.9


Aug 10th, 2015

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