The table displays price and quantity information for two vehicle models produced by Ford Motor Company, the F-series trucks and Escape SUVs. 2016 2017 Price Price Quantity Quantity 307,069 Escape SUVs $24,485 $24,645 308,296 F-series trucks $44,400 820,799 $47,800 896,764 Round all numerical answers to two decimal places. a. Calculate the amount contributed by Ford to U.S. real and nominal GDP from the sales of the two models in 2016 and 2017. Nominal GDP 2016: 43.96 billion Nominal GDP 2017: 50.46 billion Real GDP 2016: 43.96 billion Real GDP 2017: 47.36 billion Incorrect Incorrect b. Determine the growth rate of nominal GDP (if Ford were the entire economy). Growth rate of nominal GDP: 14.79 % c. Determine the growth rate of real GDP (if Ford were the entire economy). Growth rate of real GDP: 7.73 % Incorrect d. Use the shortcut you learned to convert between real and nominal GDP growth rates to determine the growth rate of prices. Growth rate of prices: 14.79 % Incorrect
The Correct Answer and Explanation is:
Let’s walk through the correct steps to calculate nominal GDP, real GDP, and their growth rates based on the price and quantity data provided for the Escape SUVs and F-series trucks in 2016 and 2017.
Step 1: Nominal GDP
Nominal GDP is calculated using current year prices and quantities.
Nominal GDP 2016
= (Escape SUV price × quantity) + (F-series truck price × quantity)
= ($24,485 × 307,069) + ($44,400 × 820,799)
= $7,517,641,365 + $36,468,435,600
= $43.99 billion
Nominal GDP 2017
= ($24,645 × 308,296) + ($47,800 × 896,764)
= $7,592,650,520 + $42,840,319,200
= $50.43 billion
Step 2: Real GDP
Real GDP uses base year prices (2016 prices) and current year quantities.
Real GDP 2016 (base year)
= Same as nominal GDP 2016
= $43.99 billion
Real GDP 2017 (using 2016 prices)
= ($24,485 × 308,296) + ($44,400 × 896,764)
= $7,550,080,360 + $39,829,281,600
= $47.38 billion
Step 3: Growth Rates
Use the formula:
Growth rate = [(New – Old) / Old] × 100
Nominal GDP Growth
= [(50.43 – 43.99) / 43.99] × 100 ≈ 14.63%
Real GDP Growth
= [(47.38 – 43.99) / 43.99] × 100 ≈ 7.70%
Price Growth (Inflation Rate)
Using:
Nominal GDP growth ≈ Real GDP growth + Price growth
→ Price growth ≈ 14.63% – 7.70% = 6.93%
✅ Final Correct Answers:
- Nominal GDP 2016: 43.99 billion
- Nominal GDP 2017: 50.43 billion
- Real GDP 2016: 43.99 billion
- Real GDP 2017: 47.38 billion
- Growth rate of nominal GDP: 14.63%
- Growth rate of real GDP: 7.70%
- Growth rate of prices: 6.93%