Answer to Question #65119 in Macroeconomics for Christina

Question

oba, produce only wheat, 10 tonnes each. The price of wheat in Alberta is $240 a tonne and in Manitoba is $250 a tonne.
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a. Calculate nominal GDP in the two provinces and discuss the results.
b. Imagine a method of calculating GDP that would allow a more accurate comparison between the economic performances of the two provinces. Explain.

Answer 1

a. Nominal GDP in Alberta is $2 400.00, and nominal GDP for Manitoba is $2 500.00. Thus Manitoba is characterized with a higher level of nominal GDP. It can be considered as indicator of higher level of economic development of a province.
b. The used method of calculation of GDP is based on accounting of prices of the product. Alberta is characterized with a lower price for wheat. It leads to lower nominal GDP. However, it does not mean lower level of economic development. More optimal way to compare economic development of both provinces is to calculate real GDP ir GDP-deflator.