Question

The chart below gives prices and output information for the country of Utopia. Use this information to calculate real and nominal GDP for both years. Use 2001 as the base year.
Year 2000 2001
Price Quantity Price Quantity
Ice Cream $7.00 600 $3.00 400
Blue Jeans $70.00 20 $20.00 90
Laptops $300.00 5 $300.00 5
2000 nominal GDP = $_________
2001 nominal GDP = $_________
2000 real GDP = $_________
2001 real GDP = $_________

Answer 1

Answer and Explanation:

The computation is shown below:

As we know that

Nominal GDP = Sum of (Present Year Price × Present Year Quantity)

And,  

Real GDP = Sum of (Base Year Price × Present Year Quantity)

Now

(a) Nominal GDP, 2000 is

= $[(7 × 600) + (70 × 20) + (300 × 5)]

= $4,200 + $1,400 + $1,500

= $7,100

(b) Nominal GDP, 2001 is

= $[(3 × 400) + (20 × 90) + (300 × 5)]

= ($1,200 + $1,800 + $1,500)

= $4,500

(c) Real GDP, 2000 is

= $[(3 × 600) + (20 × 20) + (300 × 5)]

= $1,800 + $400 + 1,500

= $3,700

(d) Real GDP, 2001 is

= $[(3 × 400) + (20 × 90) + (300 × 5)]

= $1,200 + $1,800 + $1,500

= $4,500