Question

Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is:____________________.
A) $100.
B) $700.
C) $1,300.
D) $300

Answer 1

Answer:

D) $300

Explanation:

Nominal GDP (Gross Domestic Product) is the estimations based on current year of GDP. In general, GDP means that the monetary value of all the goods and services produced in a country. Nominal GDP differs from real GDP because it includes changes in prices due to inflation, which reflects the rate of price increases in an economy.

Now we have previous year data:

10 DVD in 20$ for each and profit is 200$

5 DVD Player in 100$ for each and profit is 500$

So the total profit for previous year is 700$

According to the data of current year we should take account of new price rates and calculate relatively the profits and it will be the nominal GDP. So,

15 DVD in 10$ for each and profit is 150$

10 DVD Player in 50$ each and profit is 500.

So as we see, we sold 5 more DVD this year and it equals 50$ and 5 more DVD Player and it equals 250$. Then, total profit relatively to the prices of last year is 300$. Next, the nominal GDP is 300$.