Answer to Question #109009 in Microeconomics for Tonoy

Question

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.

Answer 1

$a) nominal GDP$ ₂₀₁₇$=1×100+2×50=$ $$200;$

$nominal GDP$ ₂₀₁₈$=$ $1×200+2×100=$ $$400;$

$nominal GDP$ ₂₀₁₉ $=2×400+4×100=$ $ $800;$

$real GDP$ ₂₀₁₇$=1×100+2×50=$ $$200;$

$real GDP$ ₂₀₁₈$=1×200+2×100=$ $$400;$

$realGDP$ ₂₀₁₉$=1×200+2×100=$ $$400;$

GDP deflator₂₀₁₇$=200/200=1;$

GDP deflator₂₀₁₈$=400/400=1;$

GDP deflator₂₀₁₉$=800/400=2;$

$b)$ change in nominal GDP₂₀₁₈$=\frac {400-200}{200}×100$ $=$ %$100;$

change in nominal GDP₂₀₁₉ $=\frac {800-400}{400}×100=$ %$100;$

change in real GDP₂₀₁₈ $=\frac{400-200}{200}×100=$ %100;

change in real GDP₂₀₁₉$=\frac {400-400}{400}×100=$ %0;

change in GDP deflator₂₀₁₈$=\frac {1-1}{1}×100=$ %$0;$

change in GDP deflator₂₀₁₉$=\frac{2-1}{1}×100=$ %$100;$