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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?
Answer
The correct answer is C. This is because in the years where France's GDP fell (2013 and 2016), Germany's GDP did not showcase a corresponding decline but instead shows different patterns. Options A and B cannot be confirmed due to a lack of inflation data and the ongoing larger GDP of Germany compared to France in each year presented. Option D is incorrect as both countries did not experience a decline in GDP during the period between 2015 and 2016.
Step 2
Calculate the percentage change in Germany's nominal GDP from 2016 to 2017.
Answer
To calculate the percentage change, use the formula:
ext{Percentage Change} = rac{ ext{New Value} - ext{Original Value}}{ ext{Original Value}} imes 100
In this case, the GDP in 2016 is 3.50 trillion USD and in 2017 is 3.69 trillion USD. Therefore:
= 5.43\%$$ Thus, the percentage change in Germany's nominal GDP from 2016 to 2017 is approximately 5.4%.Step 3
Explain one reason why Purchasing Power Parities are used.
Answer
One reason why purchasing power parities (PPP) are used is to allow for more accurate comparisons of economic data between countries. PPP adjusts for differences in price levels, making it possible to compare the relative value of goods and services without the distortions that arise from varying exchange rates. This provides a clearer picture of the economic strength and living standards across different nations.