Question

A simple economy produces two​ goods, BreadBread and Video GamesVideo Games.

Price and quantity data are as​ follows:

Production and Prices in Year 1​ (Base year)

Product	Quantity	Price Per Unit
Bread	110	​$1.00
Video Games	550	​$40.00

Production and Prices in Year 2

Product	Quantity	Price Per Unit
Bread	137.50	​$1.50
Video Games	825.00	​$80.00

In Year​ 2, nominal GDP is equal​ to:$______ and real GDP is $ ______

​(enter both responses rounded to the nearest penny​).

Answer 1

GDP is the money value of all final goods and services produced within the domestic territory of a country during an accounting year. The difference between the nominal and the real GDP is that the real GDP is inflation adjusted and the nominal GDP is not, the nominal GDP is calculated by the current year prices and real GDP is calculated by the base year prices.

Nominal GDP = Units of output price per unit.

Real GDP = Units of output Price per unit from base year.

The nominal GDP in year 2 calculated as follows.

.

The real GDP in year 2,

.

.

Ans:

Nominal GDP in year 2: $ .

Real GDP in year 2: $ .