Question

3) The nation of Talahatchee produces Bowling Balls, cases of cream soda and moon boots. The following table lists the prices and quantities of the three goods in the years 2014 and 2017. (Chapter 5) Year Bowling Balls Cream Soda Moon Boots Quantity Price Quantity Price Quantity Price 2014 100 $10 400 $20 100 $20 2017 125 $10 250 $30 100 $12.50 Find the nominal GDP for 2014 and 2017. Find the real GDP for 2014 and 2017 (assume 2014 is the base year).

Answer 1

Ans.3. a) Nominal GDP in 2014 = Price of Bowling Balls x Quantity of Bowling Balls + Price of Cream Soda x Quantity of Cream Soda + Price of Moon Boots x Quantity of Moon Boots

= $10 x 100 + $20 x 400 + $20 x 100

= $11,000

Hence, the nominal GDP in 2014 is $11,000.

b) Nominal GDP in 2017 = Price of Bowling Balls x Quantity of Bowling Balls + Price of Cream Soda x Quantity of Cream Soda + Price of Moon Boots x Quantity of Moon Boots

= $10 x125 + $30 x 250 + $12.50 x 100

= $10,000

Hence, the nominal GDP in 2017 is $10,000.

Base year = 2014

c) Real GDP in 2014 = Price of Bowling balls in 2014 x Quantity of Bowling balls in 2014

+ Price of Cream soda in 2014 x Quantity of Cream soda in 2014

+ Price of Moon boots in 2014 x Quantity of Moon boots in 2014

= $10 x 100 + $20 x 400 + $20 x 100

= $11,000

Hence, the real GDP in 2014 is $11,000.

d)  Real GDP in 2017 = Price of Bowling balls in 2014 x Quantity of Bowling balls in 2017

+ Price of Cream soda in 2014 x Quantity of Cream soda in 2017

+ Price of Moon boots in 2014 x Quantity of Moon boots in 2017

= $10 x 125 + $20 x 250 + $20 x 100

= $9,500

Hence, the real GDP in 2017 is $9,500.