Question

onsider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity A $2 250 $3 200 B $3 300 $2 400 C $4 400 $5 500 What was the gross domestic product (GDP) deflator in 2016

Answer 1

Answer:

108.34

Explanation:

The computation of gross domestic product (GDP) deflator in 2016 is shown below:-

For computing the Gross domestic Product deflator first we need to find out the Nominal GDP of 2016 and Real GDP of A, B and C which is here below:-

Nominal GDP of 2016 = ($3 × 200) + ($2 × 400) + ($5 × 500)

= $600 + $800 + $2,500

= $3,900

Real GDP of A, B and C = Price base Year 2015 × Quantity current year 2016

= $2 × 200 + $3 × 400 + $4 × 500

= $400 + $1,200 + $2,000

= $3,600

Gross domestic Product deflator = Nominal Gross domestic Product ÷ Real Gross domestic Product × 100

= $3,900 ÷ $3,600 × 100

= 108.34