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31 August, 03:52

Suppose an economy produces only burgers and bags of fries. In 2010, 4000 burgers are sold at $3 each and 6000 bags of fires are sold at $1.50 each.

In 2008, the base year, burgers sold for $2.50 each and bags of fries sold for $2 each.

a. nominal GDP is $22,000 real GDP is $21,000, and the GDP deflator is 95.45.

b. nominal GDP is $22,000, real GDP is $21,000, and the GDP deflator is 104.77.

c. nominal GDP is $21,000, real GDP is $22,000, and the GDP deflator is 95.45.

d. nominal GDP is $21,00, real GDP is $22,000, and the GDP deflator is 104.77.

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Answers (1)
  1. 31 August, 06:28
    0
    Option (C) is correct.

    Explanation:

    Nominal GDP:

    = (No. of burgers sold * Selling price of each) + (No. of fries sold * Selling price of each)

    = (4000 * 3) + (6000 * 1.5)

    = 12,000 + 9,000

    = $21,000

    Real GDP (in 2008 prices)

    = (No. of burgers sold * Selling price of each) + (No. of fries sold * Selling price of each)

    = (4,000 * $2.50) + (6000 * $2)

    = 10,000 + 12,000

    = $22,000

    GDP deflator:

    = (Nominal GDP : Real GDP) * 100

    = (21000 : 22000) * 100

    = 95.45
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