Homework Answers
Answer 29
The correct answer is (C) nominal GDP is $1800, real GDP is 2000, and the GDP deflator is 90.
Nominal GDP is the market value of all goods and services produced during accounting year when measured at current Prices.
Mathematically, Nominal GDP = Sum of (Price*Quantity) of all goods where Prices and quantities are of accounting Year.
So,
Nominal GDP in 2010 = Sum of (Price*Quantity) of all goods(i.e. cranberries and maple syrup) where Prices and quantities are of 2010
=> Nominal GDP in 2010 = 50*20 + 100*8 = 1800
Hence, Nominal GDP in 2010 = 1800
Real GDP is the market value of all goods and services produced during accounting year when measured at constant Prices(base year Prices).
Mathematically, Real GDP = Sum of (Price*Quantity) of all goods where quantities are of accounting Year and prices of base year
So,
Real GDP in 2010 = Sum of (Price*Quantity) of all goods(i.e. cranberries and maple syrup) where quantities are of 2010 and price are of 2009(base year)
=> Real GDP in 2010 = 50*10 + 100*15 = 2000
Hence, Real GDP in 2010 = 2000
Formula :
GDP Deflator = (Nominal GDP / Real GDP)*100
=> GDP Deflator in 2010 = (Nominal GDP in 2010 / Real GDP in 2010)*100
=> GDP Deflator in 2010 = (1800/2000)*100
Thus, GDP Deflator in 2010 = 90
Hence, the correct answer is (C) nominal GDP is $1800, real GDP is 2000, and the GDP deflator is 90.
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