A simple economy produces two goods, Corn BreadCorn Bread and Computer GamesComp
ID: 397906 • Letter: A
Question
A simple economy produces two goods,
Corn BreadCorn Bread
and
Computer GamesComputer Games.
Price and quantity data are as follows:
Production and Prices in Year 1 (Base year)
Product
Quantity
Price Per Unit
Corn BreadCorn Bread
130
$2.50
Computer GamesComputer Games
900
$55.00
Production and Prices in Year 2
Product
Quantity
Price Per Unit
Corn BreadCorn Bread
162.50
$3.75
Computer GamesComputer Games
1,350.00
$110.00
In Year 2, nominal GDP is equal to:
$nothing ,
and real GDP is
$nothing
(enter
both responses rounded to the nearest
penny).
Product
Quantity
Price Per Unit
Corn BreadCorn Bread
130
$2.50
Computer GamesComputer Games
900
$55.00
Explanation / Answer
In Year 2, nominal GDP = corn bread quantity* price of corn bread + computer games quantity*price of computer games
In Year 2, nominal GDP = 162.5*3.75 + 1350*110 = $149109.38
---
In Year 2, real GDP = corn bread quantity* price of corn bread in base year + computer games quantity*price of computer games in base year
In Year 2, real GDP = 162.5*2.5 + 1350*55 = $74656.25
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