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Item Year 1 Year 2 Apples 20,000 @ 25¢ each 30,000 @ 30¢ each Bicycles 700...
Item Year 1 Year 2
Apples 20,000 @ 25¢ each 30,000 @ 30¢ each
Bicycles 700 @ $800 each 650 @ $900 each
Movie rentals 10,000 @ $1.00 each 12,000 @ $1.50 each
a. Compute nominal GDP in each year.
Year 1: $575,000
Year 2: $612,000
b. By what percentage did nominal GDP change between Year 1 and Year 2?
(Use the percentage change formula = [(new value - original value)/original value]*100.)
Nominal GDP increased by 6.4%
c. Now compute real GDP in Year 2 by using the prices of Year 1.
Real GDP:
d. By what percentage did real GDP increase between Year 1 and Year 2?
(Use the percentage change formula = [(new value - original value)/original value]*100.)
Real GDP decreased by

1 decimal places required.
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Answer #1
Year 1
20,000 @ 25¢ each 30,000 @ 30¢ each
Bicycles 700 @ $800 each 650 @ $900 each
Movie rentals 10,000 @ $1.00 each 12,000 @ $1.50 each
a. Compute nominal GDP in each year.
  
Year 1: (20000*0.25)+(700*800)+(10000*1) = $575,000
Year 2: (30000*0.3)+(650*9)+(12000*1.5) = $612,000
b. By what percentage did nominal GDP change between Year 1 and Year 2?
(Use the percentage change formula = [(new value - original value)/original value]*100.)
Nominal GDP increased by

[(612000-575000)/612000)*100

= 6.4%
c. Now compute real GDP in Year 2 by using the prices of Year 1.
Real GDP:

(30000*0.25)+(650*800)+(12000*1)

= 539500
d. By what percentage did real GDP increase between Year 1 and Year 2?
(Use the percentage change formula = [(new value - original value)/original value]*100.)
Real GDP decreased by

[(539500-575000)/575000]*100

= 6.17%
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