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Question

CSecure https://www.mathxl.com/Student/PlayerHomework.aspx?h workid 494893723&questionld-5&flushed-false&cld-5133876&back DoAssignments.aspx ECO-202-T1275 Macroeconomics 18EW1 Shameeca Holmes & 9/13/18 1:50 PM Homework: 2-2 MyEconLab: Module Two Homework core: 0 of 4 pts Concept: Real/Nominal GDP 1 A simple economy produces two goods, Apple Pies and Computer Games. Price and quantity data are as follows Save 5 of 10 (4 complete) HW Score: 40%, 10 of 25 pts EQuestion Help Production and Prices in Year 1 (Base year) Quan Apple Pies 100 $1.50 $55.00 Production and Prices in Year 2 Price Per Unit Quantity 125.00 825.00 $110.00 In Year 2, nominal GDP is equal to: s and real GDP is enter both responses rounded to the nearest penny). Enter your answer in the edit fields and then click Check Answer Clear All PM All parts showing O Type here to search

Explanation / Answer

Answer

Nominal GDP is defined as the value of good and services at current Year prices

Nominal GDP in Year 2 = Price of Apple Pies in Year2* Quantity of Apple Pies in Year2 + Price of Computer Games in Year2* Quantity of Computer Games in Year2

Hence, Nominal GDP in Year 2 = 125*2.25 + 825*110 = $91031.25

Real GDP is defined as the value of good and services at Base Year prices

In this case Base Year is Year 1

Real GDP in Year 2 = Price of Apple Pies in Year1* Quantity of Apple Pies in Year2 + Price of Computer Games in Year1* Quantity of Computer Games in Year2

Hence, Real GDP in Year 2 = 1.5*125 + 55*825 = $45562.5

Hence Nominal GDP in year 2 is equal to $91031.25 and Real GDP in Year 2 is equal to $45562.5