Questions
National income
Question 1
- What is meant by ‘value added’?
- Distinguish between nominal and real national income.
- Define GDP per head.
- Calculate the real growth rate for a country, as an annual %, if in a given year the value of nominal income rises from $800b to $850, and the index of inflation rises to 104 during that year – assume it started the year at 100.
Question 2
Consider the data of the National Income, inflation and population of a hypothetical economy.
| YEAR | NOMINAL GDP $B | INFLATION INDEX | POPULATION (M) |
| 2014 | 790 | 100 | 40 |
| 2015 | 870 | 107 | 41 |
| 2016 | 940 | 118 | 42 |
| 2017 | 1000 | 122 | 43 |
- What is the base year?
- What was the value of Y in real terms in 2016 compared with the base year?
- Calculate real Y per head in 2015.
- Describe and comment on the state of the economy in 2014 in comparison with 2017.
