Question

Below are some data from the land of milk and honey.

Year Price of Milk Quantity of Milk Price of Honey Quantity of Honey
2014 $1 100 $2 50
2015 $2 200 $3 100
2016 $3 300 $4 150
Compute Nominal GDP for each year.
Compute Real GDP for each year.
Compute the GDP Deflator for each year.

Answer 1

Answer:

Calculating nominal GDP:

2013: ($1 × 100 ) + ($2 × 50 ) = $200

2014: ($1 × 200 ) + ($2 × 100) = $400

2015: ($2 × 200 ) + ($4 × 100 ) = $800

Calculating real GDP (base year 2013):

2013: ($1× 100 ) + ($2 × 50 ) = $200

2014: ($1 × 200 ) + ($× 100 ) = $400

2015: ($1 × 200 ) + ($2 × 100 ) = $400

Calculating the GDP deflator:

2013: ($200/$200) × 100 = 100

2014: ($400/$400) × 100 = 100

2015: ($800/$400) × 100 = 200Explanation: