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24 November, 10:17

A simple economy produces two goods, Bread and Technical Manuals. Price and quantity data are as follows:Production and Prices in Year 1 (Base year) Product Quantity Price Per UnitBread 120 $3.00Technical Manuals 800 $50.00Production and Prices in Year 2Product Quantity Price Per UnitBread 150 $4.50Technical Manuals 1,200 $100.00In Year 2, nominal GDP is equal to: _, and real GDP is _ (enter both responses rounded to the nearest penny).

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  1. 24 November, 11:16
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    Answer: (1) 120,675

    (2) 60,450

    Explanation:

    (1) Nominal GDP, year 2 ($) = Sum of (Year 2 price * Year 2 quantity)

    = 150 * 4.50 + 1,200 * 100

    = 675 + 120,000

    = 120,675

    (2) Real GDP, year 2 ($) = Sum of (Year 1 price x Year 2 quantity)

    = 3 * 150 + 50 * 1200

    = 450 + 60,000

    = 60,450
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