Thank you for visiting The 2005 GDP was 12 456 trillion and the GDP in 2006 was 13 247 trillion This means that the economy grew by 13 247. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Answer:
This means that the economy grew by $791 billion in nominal terms
Explanation:
Nominal growth can be determined by only determining the difference in the GDP in 2006 and the GDP in 2005 only but the economic growth in real terms takes account of also the inflation.
In this case, the economic growth in nominal terms can be expressed as;
G=F-I
where;
G=economic growth in nominal terms
F=final GDP in 2006
I=initial GDP in 2005
This can also be written as;
Economic growth in nominal terms=GDP in 2006-GDP in 2005
In our case;
G=unknown
F=$13.247 trillion
I=$12.456 trillion
replacing;
G=13.247-12.456=0.791 trillion
0.791 trillion=$791 billion
This means the economy grew by $791 billion in nominal terms
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Rewritten by : Jeany
Final answer:
The economy grew by $791 billion in nominal terms from a GDP of $12.456 trillion in 2005 to $13.247 trillion in 2006. Nominal GDP reflects economic output without adjusting for inflation. To calculate real economic growth, one must adjust for inflation, but the question only asks for nominal terms.
Explanation:
The student has asked how the economy grew if the GDP was $12.456 trillion in 2005 and $13.247 trillion in 2006. The calculation provided by the student shows that the economy grew by $791 billion in nominal terms. To elaborate, nominal GDP measures the total value of all goods and services produced by a country in a specific year, at current prices, without adjusting for inflation. The figure provides the dollar value of economic output and growth without accounting for changes in price levels across the time period.
To compare economic growth from one year to the next in real terms, one would need to adjust these nominal values for inflation to reflect the actual increase in goods and services produced. For instance, using the student's calculation style, if we wanted to calculate the growth rate, we would divide the change in GDP ($1.03 trillion – $1 trillion) by the average GDP between the two years ($1.03 trillion + $1 trillion)/2. However, in the current context of the question, only the nominal increase is asked for, so inflation does not need to be considered.
