The chapter argues that investment depends negatively on the interest rate because an increase in the cost of borrowing discoura
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Answer: Nominal GDP 2016 = $7,100
REAL GDP 2016 = $3,700
Nominal GDP 2017 = $4,500
Real GDP 2017 = $4,500
Explanation:
To calculate the Nominal and Real GDPs we use the following formulas,
Nominal GDP = Sum of (Current Year Price x Current Year Quantity)
Real GDP = Sum of (Base Year Price x Current Year Quantity)
We make the assumption that 2017 is the base year so calculating would be,
Nominal GDP, 2016 = [(7 x 600) + (70 x 20) + (300 x 5)]
= $(4200 + 1400 + 1500)
= $7,100
Remember for this we will use 2017 as the base year so we will use 2017 prices
Real GDP, 2016 = [(3 x 600) + (20 x 20) + (300 x 5)]
= $(1800 + 400 + 1500)
= $3,700
Nominal GDP, 2017 = [(3 x 400) + (20 x 90) + (300 x 5)]
= $(1200 + 1800 + 1500)
= $4,500
Now seeing as 2017 is the base year, it's nominal and real GDPs will be the same.
Real GDP, 2017 = $[(3 x 400) + (20 x 90) + (300 x 5)]
= $(1200 + 1800 + 1500)
= $4,500
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