Question

Consider 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 2012. Good 2012 Price 2012 Quantity 2013 Price 2013 Quantity A $2.00 500 $2.50 600 B $4.00 1,000 $5.00 900 C $2.00 200 $1.00 300 What was the nominal gross domestic product (GDP) in 2013? Group of answer choicesA. what was the real GDP in 2013?b. What was the gdp deflator in 2013?c. What was the inflation rate between the two years?d, What was the nominal gdp in 2012?

Answer 1

Answer:

a. $6,300

b. 116.67%

c. 16.67%

d. $5,400

Explanation:

Note: The data in question are merged together and they are first separated before the questions are answered as follows:

Good   |  2012_Price | 2012_Quantity | 2013_Price | 2013_Quantity

A                 $2.00               500                   $2.50            600

B                 $4.00             1,000                   $5.00            900

C                 $2.00               200                   $1.00             300

The questions are now answered as follows:

a. What was the nominal gross domestic product (GDP) in 2013?

Nominal GDP in 2013 = ($2.50 * 600) + ($5.00 * 900) + ($1.00 * 300) = $6,300

b. What was the gdp deflator in 2013?

Real GDP in 2013 = Summation of the product of base year prices and the current output = ($2.00 * 600) + ($4.00 * 900) + ($2.00 * 300) = $5,400

GDP Deflator in 2013 = (Nominal GDP in 2013 / Real GDP in 2013) * 100 = ($6,300/$5,400) * 100 = 116.67%

c. What was the inflation rate between the two years?

Since 2012 is the base year, GDP deflator in 2012 is 100%.

Inflation = GDP deflation in 2013 - GDP deflator in 2012 = 116.67% - 100% = 16.67%

d. What was the nominal gdp in 2012?

Nominal GDP in 2012 = ($2.00 * 500) + ($4.00 * 1000) + ($2.00 * 200) = $5,400