Please write your answer with detail. 11. Suppose an economy produces only green
ID: 1160594 • Letter: P
Question
Please write your answer with detail.
11. Suppose an economy produces only green eggs and ham. In 2016, 100 dozen green eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2017, the base year, green eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2016, (a) nominal GDP is $400, real GDP is $500, and the GDP deflator is 80. (b) nominal GDP is $400, real GDP is $500, and the GDP deflator is 125. cnominal GDP is $500, real GDP is $400, and the GDP deflator is 80. d nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.Explanation / Answer
Answer to the above problem is Option d)
Explanation is as follwos:
Nominal GDP = Sum of all revenues from goods and services produced in a given year.
For 2016 , Economy is producing only 2 goods , green eggs and ham
Revenue from green eggs=P*Q
=3*100=300
Revenue from Ham=P*Q
=4*50=200
Nominal GDP for 2016=300+200=$500
Real GDP for a base year is the GDP adjusted for changes in prices,
Real GDP for 2016=P*Q8
=1.5*100+5*50
=150+250 =$400
GDP deflator=Nominal GDP / Real GDP
=(500/400)*100=125