Question

Suppose that a very small economy produces only televisions and computers. Using the information below, what is the nation’s nominal GDP in Year 4? Year 1 (base year): 10 computers sold at $2000 each and 15 televisions sold at $500 each Year 4: 17 computers sold at $2200 each and 20 televisions sold at $550 each A $5250 B $27500 C $48400 D $20900

Answer 1

The nation's nominal GDP does not take inflation into account. To solve this problem, we simply calculate the nation's nominal GDP in Year 4, ignoring the base prices. Keep in mind that if we were calculating real GDP, we would have to use the base year prices in our GDP calculation. 

Year 4:
Computers: 17 x 2200 = 37,400
Televisions: 20 x 550 =   11,000 +
Total GDP                                     =$48,400
Answer is C) 48,400