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Date Posted: 09:11:57 09/21/02 Sat
Author: Dr. D.
Subject: Re: Chapter 4, aditional prolem#10 (M 4:30) (Real And Nominal Growth)
In reply to: Alex 's message, "Chapter 4, aditional prolem#10 (M 4:30)" on 11:27:05 09/14/02 Sat

For Nominal growth, calculate the % change in sales $$ from the previous year.

For Real Growth, the easiest way to do it is to convert sales DOLLARS to sales UNITS by dividing dollars by the price index. So, units would be 215,800/121.4 = 1777.59 in 93, 248400/152.8 = 1625.65 in 94, and 274300/191.4 = 1422.12 in 95

So, real growth in 1994 = (1625.65 -1777.59)/1777.59 = - 8.54%
and real growth in 1995 = -12.52% (I'll let you work the num

The reason REAL growth is negative is that prices are going up faster on a % basis than the sales volume is.

>Can anyone solve this problem step by step? Thanks a
>lot.
>
>The problem is:
>
> 1993 1994 1995
>Reported Sales $215,800 $248,400 $274,300
>Aver.price Index 121.4 152.8 191.8
>Sales ? ? ?
>
>It is asking for Sales(using 1993 as base year)
>Nominal Growth rates in sales and Real Growth rate in
>sales.

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