ECON-3020 Lecture 4: Chained GDP Notes
21 Apr 2018
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Department
Course
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Chain Weighted Real GDP: Notes & Example
Assume there are two goods, Good A and Good B. The data on prices and quantities for the two goods
are provided in the table below.
Year 1
Year 2
Year 3
Price of Good A
$10
$9
$5
Quantity of Good A
20
25
30
Price of Good B
$1
$1.1
$1.2
Quantity of Good B
100
102
104
Nominal GDP
Real GDP (base year = Year 1)
Real GDP (base year = Year 2)
Real GDP (base year = Year 3)
Calculating growth rates:
If the base year , b = Year 1
The ratio of RGDP in year 2 to RGDP in year 1 = ļŗīÆīÆī®½īÆī°®
īÆīÆī®½īÆī°ļ»īÆīī¬µ = _________________
This implies that between Year 1 and Year 2 the economy grew at a rate = __________________
If the base year, b = Year 2
The ratio of RGDP in year 2 to RGDP in year 1 = ļŗīÆīÆī®½īÆī°®
īÆīÆī®½īÆī°ļ»īÆīī¬¶ = _________________
This implies that between Year 1 and Year 2 the economy grew at a rate = __________________
If the base year, b = Year 3
The ratio of RGDP in year 2 to RGDP in year 1 = ļŗīÆīÆī®½īÆī°®
īÆīÆī®½īÆī°ļ»īÆīī¬· = _________________
This implies that between Year 1 and Year 2 the economy grew at a rate = __________________
Does the choice of the base year matter? Yes / No
Explain how so?
Similarly,
If the base year, b = Year 1
The ratio of RGDP in year 3 to RGDP in year 2 = ļŗīÆīÆī®½īÆī°Æ
īÆīÆī®½īÆī°®ļ»īÆīī¬µ = _________________
This implies that between Year 2 and Year 3 the economy grew at a rate = __________________
If the base year, b = Year 2
The ratio of RGDP in year 3 to RGDP in year 2 = ļŗīÆīÆī®½īÆī°Æ
īÆīÆī®½īÆī°®ļ»īÆīī¬¶ = _________________
This implies that between Year 2 and Year 3 the economy grew at a rate = __________________
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Document Summary
Assume there are two goods, good a and good b. The data on prices and quantities for the two goods are provided in the table below. If the base year , b = year 1. The ratio of rgdp in year 2 to rgdp in year 1 = This implies that between year 1 and year 2 the economy grew at a rate = __________________ If the base year, b = year 1. If the base year, b = year 2. If the base year, b = year 3. The ratio of rgdp in year 3 to rgdp in year 2 = This implies that between year 2 and year 3 the economy grew at a rate = __________________ Chained rgdpt+1 = chained rgdpt (cid:4672) (cid:4673) (cid:4672) (cid:4673) (cid:4673) (cid:4672) (cid:4673) (cid:4673) (cid:4673) (cid:4672) Chained rgdp3 = where, chained rgdp benchmark year = ngdp benchmark year.
