A simple economy produces two goods, Pumpkin Pies and Technical Manuals. Price a
ID: 1147505 • Letter: A
Question
A simple economy produces two goods, Pumpkin Pies and Technical Manuals. Price and quantity data are as follows:
Production and Prices in Year 1 (Base year)
Product
Quantity
Price Per Unit
Pumpkin Pies
130
$1.00
Technical Manuals
650
$30.00
Production and Prices in Year 2
Product
Quantity
Price Per Unit
Pumpkin Pies
162.50
$1.50
Technical Manuals
975.00
$60.00
In Year 2, nominal GDP is equal to:_______and real GDP is ______
(enter both responses rounded to the nearestpenny).
Product
Quantity
Price Per Unit
Pumpkin Pies
130
$1.00
Technical Manuals
650
$30.00
Explanation / Answer
Nominal GDP = Current year prices * Current year quantities
Therefore, Nominal GDP in year 2 = (1.5*162.50) + (60*975) = $58,743.75.
Real GDP = Base year prices * Current year quantities
Therefore, Real GDP in year 2 = (1*162.50) + (30*975) = $29,412.5.
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