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?
    1. A savings account earning 1% per year:
    2. A U.S. Treasury bond earning 3% interest per year.
    3. A stock market mutual fund earning 8% interest per year.

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