Week 5 Homework
- (16 points, 2 per blank and 4 for the last part) Fill in the missing data in the following table. Use 2013 as the base year.
| Year | Nominal GDP | Real GDP | GDP Deflator |
| 2013 | $100 | (a) | (b) |
| 2014 | (c) | $108 | 101.8 |
| 2015 | $115 | $107 | (d) |
| 2016 | $125 | (e) | 104.2 |
| 2017 | (f) | $115 | 110.4 |
(4 points) What is the growth rate in nominal GDP between years 2014 and 2015? What is the growth rate in real GDP between years 2014 and 2015?
- (2 points) A friend is reading a financial blog and wants to know if nominal or real GDP is more important. Which one do you recommend? In one sentence, explain.
- (9 points, 3 points each) The rule of 72 applies in any growth rate application. Let’s say you have $1000 in savings in three alternatives. How long would it take to double your savings in each of the three accounts?
- A savings account earning 1% per year:
- A U.S. Treasury bond earning 3% interest per year.
- A stock market mutual fund earning 8% interest per year.
