Assume Country Z only produces hot dogs and buns.
Given the information below, what is the value of GDP in Country Z?
Nominal GDP refers to the total value of goods and services produced using current prices as aggregators. Real GDP, in contrast, aggregate value of goods and services using a base-year price, which is kept constant for all other years.
Answer and Explanation:
The value of GDP is the sum of the value of Hot Dogs and the value of Buns. The value of each is the price of the good times the quantity of the good. We first compute the value of each good:
- value of hot dog = 4 * 1 = $4
- value of buns = 4 * 0.5 = $2
Thus GDP = 4 + 2 = $6.
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from Economics 102: MacroeconomicsChapter 4 / Lesson 3