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Below are some data from the land of milk and honey. YEAR       PRICE OF MILK       ...

Below are some data from the land of milk and honey.

YEAR       PRICE OF MILK        QUANTITY OF MILK    PRICE OF HONEY        QUANTITY OF HONEY

2001                $1                                100 Qts.                     $2                               50 qts.

2002                $1                                200                              $2                                100

2003                $2                                200                              $4                                100

1. Compute for each year the following below using 2001 as the base year.

a) nominal GDP

b) real GDP,and

c) the GDP deflator for each year, using 2001 as the base year.

2. Why do economists use real GDP rather than nominal GDP to gauge economic well being?

Solutions

Expert Solution

Rahul Sunny answered 7 months ago
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