GDP at Purchasing Power Parities, Germany and France (nominal, trillions of US dollars) 2010–2017 - Edexcel - A-Level Economics A - Question 5 - 2021 - Paper 2
Question 5
GDP at Purchasing Power Parities, Germany and France (nominal, trillions of US dollars) 2010–2017.
From the data in the graph above, which one of the following may ... show full transcript
Worked Solution & Example Answer:GDP at Purchasing Power Parities, Germany and France (nominal, trillions of US dollars) 2010–2017 - Edexcel - A-Level Economics A - Question 5 - 2021 - Paper 2
Step 1
From the data in the graph above, which one of the following may be deduced?
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Answer
The only correct answer is C. This is because:
Option A is incorrect as there is no information on inflation provided.
Option B is incorrect since Germany's GDP is larger than France's in every year shown.
Option D is also incorrect because the GDP of both countries actually grew between 2015 and 2016.
Step 2
Calculate the percentage change in Germany’s nominal GDP from 2016 to 2017.
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Answer
To calculate the percentage change, we use the formula:
% change=originalchange×100
From the graph, the nominal GDP for Germany in 2016 is 3.50 trillion and in 2017 it is 3.69 trillion. The change is:
change=3.69−3.50=0.19
Substituting into the formula:
% change=3.500.19×100≈5.4%
Step 3
Explain one reason why Purchasing Power Parities are used.
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Answer
One reason for using Purchasing Power Parities (PPP) is to improve the accuracy when comparing economic data between countries. PPP takes into account the cost of living and the purchasing power of different currencies, thus providing a more balanced view of the economic capabilities of a country than nominal values alone.
