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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. The data from the graph shows that in every year where France’s GDP decreased, Germany’s GDP also experienced a decline in the same year. This indicates a correlation between the two countries' economic performances during the periods in question.
Options A and B cannot be confirmed due to lack of specific information regarding inflation rates and the data showing that Germany’s GDP is larger than France’s in every year displayed. Option D is incorrect as both countries’ GDPs showed growth between the years 2015 and 2016.
Step 2
Calculate the percentage change in Germany’s nominal GDP from 2016 to 2017.
Answer
To calculate the percentage change, we can use the formula:
From the data, Germany’s GDP in 2016 is 3.50 trillion and in 2017 is 3.69 trillion. Hence, the change is:
Putting these values into the formula gives:
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
Purchasing Power Parities (PPP) are used to improve accuracy when comparing data between countries. They provide a more reliable measure by taking into account the relative cost of living and the purchasing power of different currencies. This allows economists and researchers to obtain a more realistic comparison of economic productivity and standards of living between nations.