Question

Peg's Manicure Manor did 4,000 sets of nails in 2010 and 4,500 sets of nails in 2011. The price of a set of nails was $20 in 2010 and $22 in 2011. If 2010 is the base year, Peg's contribution to real GDP in 2011 was ______ and to nominal GDP in 2011 was _____.

Answer 1

Answer:

Real GDP = 4,500 × $20 = $90,000

Nominal GDP= 4,500× $22= $99,000

Explanation:

Nominal GDP is the GDP valued in current Dollars term. That is the aggregate quantity of goods and services multiplied by the current value.

Every economic agent contributes to this figure by legimate productive activity, so is Peg Manure Manor

Contribution to Nominal GDP = Qty in current year × price in current year

                                                = 4,500× $22= $99,000

Real GDP is the  amount by which the  aggregae goods and services have increased in tangible absolute amount. That is, it is the nominal GDP adjusted for inflation rate.

Contribution to Real GDP = Qty in current year × price in base year

                = 4,500 × 20 = $90,000

Inflation and Inflation rate :Inflation is the increase in the general price level. it is measured by CPI.

CPI is the a measure of the average price of a basket of goods and services consumed by a typical consumer. The percent change in the CPI is measured as Inflation rate.