An island economy produces only bananas and coconuts. Table 1 gives the quantity
ID: 1201715 • Letter: A
Question
An island economy produces only bananas and coconuts. Table 1 gives the quantity produced and prices in 2013 and Table 2 gives the same information for 2014.
1. Nominal GDP in 2013 is __________.
2. Nominal GDP in 2014 is __________.
3. Real GDP (in terms of 2013 prices) in 2013 is __________.
4. Real GDP (in terms of 2013 prices) in 2014 is __________.
5. The % increase in nominal GDP from 2013 to 2014 is __________.
6. The % increase in real GDP from 2013 to 2014 is ___________.
TABLE 1 : In 2013 Item Quantity Price Bananas 100 $10 a bunch Coconuts 50 $12 a bagExplanation / Answer
1. Nominal GDP in 2013 = ($10 * 100) + ($12 * 50) = $1600
2. Nominal GDP in 2014 = ($15 * 110) + ($10 * 60) = $2250
3. Real GDP (in terms of 2013 prices) in 2013 = ($10 * 100) + ($12 * 50) = $1600
4. Real GDP (in terms of 2013 prices) in 2014 = ($10 * 110) + ($12 * 60) = $1820
5. The % increase in nominal GDP from 2013 to 2014 = [(2250 - 1600) / 1600] * 100 = 40.63%
6. The % increase in real GDP from 2013 to 2014 = [(1820 - 1600) / 1600] * 100 = 13.75%
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