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UK real Gross Domestic Product (GDP), annual percentage change 2014–2017 Total real UK GDP in 2016 was £200,000 million - Edexcel - A-Level Economics A - Question 1 - 2021 - Paper 2
Question 1
UK real Gross Domestic Product (GDP), annual percentage change 2014–2017 Total real UK GDP in 2016 was £200,000 million. With reference to the chart above, calculat... show full transcript
Worked Solution & Example Answer:UK real Gross Domestic Product (GDP), annual percentage change 2014–2017 Total real UK GDP in 2016 was £200,000 million - Edexcel - A-Level Economics A - Question 1 - 2021 - Paper 2
Step 1
Total real UK GDP for 2017
Answer
To calculate the total real UK GDP for 2017, we first note the GDP growth rate from 2016 to 2017 from the chart, which is 1.7%. Therefore, we can apply the growth rate to the 2016 GDP:
- Calculate the increase in GDP:
ext{Increase} = ext{GDP in 2016} imes rac{ ext{Growth rate}}{100}
Substituting the values:
ext{Increase} = £200,000 ext{ million} imes rac{1.7}{100} = £3,400 ext{ million}
- Finally, add this increase to the GDP of 2016:
Step 2
Explain the term 'real gross domestic product'.
Answer
Real Gross Domestic Product (GDP) is the monetary value of all finished goods and services produced within a country's borders in a specific time period, adjusted for inflation or deflation. This adjustment allows for a more accurate comparison of economic output over time by removing the effects of price changes. Real GDP reflects an economy's actual growth, making it a crucial indicator for economic analysis. By using constant prices rather than current prices, it gives a clearer measure of changes in production and economic performance.
Step 3
With reference to the chart on page 2, which one of the following is correct over the period shown?
Answer
The correct answer is D: The UK economy was in recession in 2015. This conclusion is drawn based on the significant decline in GDP growth from the previous year, indicating an economic contraction.