Question

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.
What is nominal GDP for year 1, year 2, year 3?

Answer 1

Answer:

The GDP for year 1, year 2, and year 3 is $12, $20 and, $30 respectively.

Explanation:

The nominal GDP is the value of goods and services produced in an economy in a year.

Here, the economy produces only chocolate bars. So we can find nominal GDP by calculating the value of chocolate bars produced in each year.

Nominal GDP for year 1

= $Price\ \times\ Quantity$

= $3\ \times\ 4$

=$12

Nominal GDP for year 2

= $Price\ \times\ Quantity$

= $4\ \times\ 5$

=$20

Nominal GDP for year 3

= $Price\ \times\ Quantity$

= $5\ \times\ 6$

=$30