Given a simple economy which only produces computers, apples, and furniture, consider the...

Question:

Given a simple economy which only produces computers, apples, and furniture, consider the following outputs and prices for the years 1990 and 2005:

1990 2005
Quantity Price Quantity Price
Computers 20 10 30 20
Apples 10 20 20 20
Furniture 30 10 0 5
Popcorn 10 20 10 50
Phones 50 10 20 100

A) What is the 1990s nominal GDP?

B) What is the 2005 nominal GDP?

C) What is the 2005 real GDP, measured in 1990s dollars?

D) What is the 1990 real GDP, measured in 2005 dollars?

Real GDP and Nominal GDP:

Real GDP is the value of Gross Domestic Product valued at the base year prices. On the other hand, the nominal GDP is the value of Gross Domestic Product evaluated at the current year prices.

Answer and Explanation:

A)

The 1990 nominal GDP = Quantity in 1990 * price in 1990

The 1990 nominal GDP = (20 * 10) + (10 * 20) + (30 * 10) + (10 * 20) + (50 * 10) =...

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Gross Domestic Product: Nominal vs. Real GDP

from Economics 102: Macroeconomics

Chapter 5 / Lesson 5
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