Question #109009

1. Below are the data of Milk and Honey in an economy

YEAR PRICE OF Milk QUANTITY OF Milk PRICE OF Honey QUANTITY OF Honey

2017 (Base year) $1 100 $2 50

2018 $1 200 $2 100

2019 $2 200 $4 100

a) Compute nominal GDP, real GDP and GDP deflator for each year.

b) Compute the percentage change in nominal GDP, real GDP and GDP deflator in 2018 and 2019 from the preceding year.

YEAR PRICE OF Milk QUANTITY OF Milk PRICE OF Honey QUANTITY OF Honey

2017 (Base year) $1 100 $2 50

2018 $1 200 $2 100

2019 $2 200 $4 100

a) Compute nominal GDP, real GDP and GDP deflator for each year.

b) Compute the percentage change in nominal GDP, real GDP and GDP deflator in 2018 and 2019 from the preceding year.

Expert's answer

"a) nominal GDP" _{2017}"=1\u00d7100+2\u00d750=" $"200;"

"nominal GDP" _{2018}"=" "1\u00d7200+2\u00d7100=" $"400;"

"nominal GDP" _{2019 }"=2\u00d7400+4\u00d7100=" $ "800;"

"real GDP" _{2017}"=1\u00d7100+2\u00d750=" $"200;"

"real GDP" _{2018}"=1\u00d7200+2\u00d7100=" $"400;"

"realGDP" _{2019}"=1\u00d7200+2\u00d7100=" $"400;"

GDP deflator_{2017}"=200\/200=1;"

GDP deflator_{2018}"=400\/400=1;"

GDP deflator_{2019}"=800\/400=2;"

"b)" change in nominal GDP_{2018}"=\\frac {400-200}{200}\u00d7100" "=" %"100;"

change in nominal GDP_{2019} "=\\frac {800-400}{400}\u00d7100=" %"100;"

change in real GDP_{2018} "=\\frac{400-200}{200}\u00d7100=" %100;

change in real GDP_{2019}"=\\frac {400-400}{400}\u00d7100=" %0;

change in GDP deflator_{2018}"=\\frac {1-1}{1}\u00d7100=" %"0;"

change in GDP deflator_{2019}"=\\frac{2-1}{1}\u00d7100=" %"100;"

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