consider a simple economy that produces only two products: A, B. GOOD A GOOD B Price...

consider a simple economy that produces only two products: A, B.

	GOOD A		GOOD B
	Price	Quantity	Price	Quantity
2015	20	500	30	500
2016	50	1000	40	500
2017	50	1000	50	1000

Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2018 as the base year.

Solutions

Expert Solution

P_A and P_B denotes Prices of Good A and Good B respectively
For nominal GDP of a particular year, we consider Prices of that year itself.
For Real GDP of a particular year, we consider the Prices of the base year.
GDP Deflator = (Nominal GDP/Real GDP) * 100 [for particular year]
GDP = (Price of A * Quantity of A) + (Price of B * Quantity of B)
Base year can also be 2016 or 2017, one needs to just consider P_A and P_B of that particular year for calculations.

Rahul Sunny answered 1 year ago

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