Year Price of Cereal Quality of Cereal Price of Milk Quality of Milk 2008 $4.00

ID: 2429372 • Letter: Y

Question

Year Price of Cereal Quality of Cereal Price of Milk Quality of Milk

2008 $4.00 90 $1.50 150

2009 $4.00 100 $2.00 180

2010 $5.00 120 $2.50 200

2011 $6.00 150 $3.50 200

In 2008, this country’s
a. nominal GDP was greater than real GDP, and the GDP deflator was greater than 100.

b. nominal GDP was equal to real GDP, and the GDP deflator was equal to 1.

c. nominal GDP was less than real GDP, and the GDP deflator was less than 100.

d. nominal GDP was equal to real GDP, and the GDP deflator was equal to 100.

d. nominal GDP was equal to real GDP, and the GDP deflator was equal to 100.

Nominal GDP = Current year Price x Current year Quantity

= 4 x 90 + 1.50 x 150 = 360 + 225 = 585

Real GDP = Base year price x Current year quantity = 4 x 90 + 1.50 x 150 = 585

GDP Deflator = Nominal GDP/Real GDP x 100 = 585/585 x 100 = 100

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