3 CMT10 l U.abe X2x\' a-e..A , ( .a@ [ 1. , Problem 3 The economy of Britannica

Question

3 CMT10 l U.abe X2x' a-e..A , ( .a@ [ 1. , Problem 3 The economy of Britannica produces three goods: computers, DVDs, and pizza The accompanying table shows the prices and output of the three goods for the years 2005 and 2006. Computers |DVDs Price Quantity Price Quantity s900 10 $10 70 $1,000 1 1 , 12 80 Year 2005 2006 Pizzal Price Quantity $15 20 $16 15 1. (1) Calculate nominal GDP in Britannica for each of the two years. What is the percent change in nominal GDP from 2005 to 2006? 2. (2) the percent change in real GDP from 2005 to 2006 Calculate real GDP in Britannica using 2005 prices for each of the two years. What is

Explanation / Answer

1) Nominal GDP in 2015 = (900*10) + ( 10*70) + (15*20) = 9000 +700 + 300 = 10000

nominal GDP in 2016 = (1000*11) + (12*80) + (16*15) = 11000 + 960 + 240 = 12200

percentage change in nominal GDP from 2015 to 2016 = (12200 - 10000 / 10000) *100 = 22%

2) real GDP in 2015 = 10000

real gdp in 2016 = ( 900 *11) + ( 10*80) + ( 15*15) = 9900 + 800 + 225 = 10925

percentage chage in rela GDp from 2015 to 2016 = (10925 - 10000 / 10000) *100 = 9.25%

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