Answer:
Year Nominal GDP Real GDP
2016 470 310
2017 1,190 595
2018 990 440
Explanation:
The question is to determine both the real GDP and teh nominal GDP of the economy in question for the three yeras
First, the Formula for
Nominal GDP = Price (Dollar Per Pen) x Quantity (Number of Pens) + Price (Dollars Per Orange) x Quantity (Number of Oranges)
Real GDP =1 x Quantity (Number of Pens) + 2 x Quantity (Number of Oranges)
Note for Real GDP we use the Price for Pen and Orange for 2016 as the base for all the years.
Finally, the Formula for the GDP Deflator = Nominal GDP / Real GDP
Based on these formulas, we calculate the yearly Nominal and Real GDPs
2016 =
Nominal GDP = 1 x 150 + 2 x 160 = 470
Real GDP = 1 x 150 + 2 x 160 = 310
GDP Deflator = 470/470 x 100 = 100%
2017 = We use the price of 2016 as the base year in dollars for real GDP
Nominal GDP = 2 x 135+ 4 x 230= 1,190
Real GDP = 1 x 135+ 2 x 230= 595
GDP Deflator = 1,190/595 x 100 = 200%
2018 = We use the price of 2016 as the base year in dollars for real GDP
Nominal GDP = 3 x 110+ 4 x 165= 990
Real GDP = 1 x 110+ 2 x 165= 440
GDP Deflator = 990/440x 100 = 225%