Question

In: Economics

1. Suppose that a simple economy produced only three goods: wheat, automobiles, and chairs. The table...

1. Suppose that a simple economy produced only three goods: wheat, automobiles, and chairs. The table below lists the quantity and prices for each of the goods for year 2000 and 2010. Based on table, answer the following questions

Quantity produced in 2000

Price in 2000

Wheat

100

$5

Automobiles

200

$40,000

Chairs

400

$10

  1. Calculate nominal GDP in year 2000.
  2. Suppose prices doubled by 2010 but production stayed the same. Calculate the nominal value of GDP in 2010.
  3. Suppose production in wheat and chairs rose by 10 percent in 2010 compared to 2000. Automobile production fell by 5 percent. If prices remain unchanged over this period, what is nominal value of GDP in 2010?

Solutions

Expert Solution

a. Nominal GDP = Prices of goods * Quantity of goods

For wheat = 100 * 5 = $500

For Automobiles = 200 * $40,000 = $8,000,000

For Chairs = 400 * $10 = $4,000

GDP = 500 + 8,000,000 + 4000

= $8,004,500

Quantity produced in 2000 Price in 2000 Value
Wheat 100 5 $500
Automobiles 200 40000 $8,000,000
Chairs 400 10 $4,000
GDP $8,004,500

b. If the prices double, the nominal would double too, becoming $16,009,000.

Quantity produced in 2000 Price in 2000 Value
Wheat 100 10 $1,000
Automobiles 200 80000 $16,000,000
Chairs 400 20 $8,000
GDP $16,009,000

c. Wheat and chair production rose by 10%, becoming 110 and 440 respectively. And the production of automobiles fell bt 5%

New productions are

Wheat 110

Automobiles 190

Chair 440

GDP:

Quantity produced in 2000 Price in 2000 Value
Wheat 110 $5 $550
Automobiles 190 $40,000 $7,600,000
Chairs 440 $10 $4,400
GDP $7,604,950

The new GDP is $7,604,950


Related Solutions

Assume that you live in a simple economy in which only three goods are produced and...
Assume that you live in a simple economy in which only three goods are produced and traded: fish, fruit, and meat. Suppose that on January 1, 2010, fish sold for $3.50 per pound, meat was $4.00 per pound, and fruit was $2.50 per pound. At the end of the year, you discover that the catch was low and that fish prices had increased to $5.00 per pound, but fruit prices stayed at $2.50 and meat prices had actually fallen to...
1.Three goods are produced and consumed in an economy during years 1 and 2. The table...
1.Three goods are produced and consumed in an economy during years 1 and 2. The table shows prices (P1 and P2) for each good and the quantities produced (Q1 and Q2) for each good. The base year is year 1. Good P1 Q1 P2 Q2 Milk (gallons) $4.10 40 $4.20 50 Beef (pounds) $1.90 20 $2.20 25 Carrots (bags) $4.50 10 $4.80 15 Enter numbers rounded to two decimal places in each blank. Real GDP in year 1 is $...
Suppose the simple island economy of Macroland only produces three goods, coconuts, pineapples and lobsters. The...
Suppose the simple island economy of Macroland only produces three goods, coconuts, pineapples and lobsters. The price and output data for selected years is shown below. The CPI for 2018 is equal to GOOD QUANTITY (millions) PRICE 2017 ($) PRICE 2018 ($) Coconuts 100 0.95 0.90 Pineapples 260 1.20 1.40 Lobsters 210 2.00 2.00 Select one: a. 147 b. 105.7 c. 94.6 d. 874 e. none of the above Suppose the simple island economy of Macroland only produces three goods,...
Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and catsup...
Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and catsup in 2010. Assume one half of the tomatoes are used in making the catsup and the other half of tomatoes are purchased by households. Product Quantity Price ($) Shoes 40 50 DVDs 100 25 Tomatoes 2000 1 Catsup 300 5 .What is the nominal GDP in 2010 for this simple economy?b.In 2011, suppose that the whole tomatoes products were used in making the catsup...
Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50...
Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced, and sold at $5 each; 11 rugs are produced, and sold at $50 each. In the second year, 54 pillows are produced, and sold for $6 each; 12 rugs are produced, and sold at $52 each. In the third year, 60 pillows are produced and sell for $7.00 dollars each; 14 rugs are produced and sold for 64 dollars each. Calculate...
Consider the simple closed economy of Plantersville with only three goods: computers, peanuts and peanut butter....
Consider the simple closed economy of Plantersville with only three goods: computers, peanuts and peanut butter. There is no government, and no international trade.  Note the following very important information: Computers and peanut butter are final goods only. Peanuts are consumed by households as a final good AND are used as an intermediate good by firms in the production of peanut butter. It takes 1/2 pound of peanuts to make each jar of peanut butter. The table below provides ALL the...
Consider that you are living in a “SIMPLE ECONOMY” in which the following goods are produced:...
Consider that you are living in a “SIMPLE ECONOMY” in which the following goods are produced: Chicken, Machine, Rice, and Iron. Let’s assume that in 2019, the Chicken was sold for Price 2, and the quantity purchased is 20 units. Machines were purchased for Price 15 and Quantity is 40units. Rice was sold for Price 28 and Quantity purchased is 20 units. Iron is purchased at the price of 12 and 19 units have taken. In the 2020 year Quantities...
A small economy produced and consumed only two goods (computers and pies) in Year 1 and...
A small economy produced and consumed only two goods (computers and pies) in Year 1 and Year 2, in the amounts shown in the table below. [Read the next sentence very carefully.] Year 1 is the base year for all calculation purposes in this question, and we also assume that the official market basket for the CPI is the actual mix of output produced in Year 1. Computers Pies Quantity Price Quantity Price Year 1 30 $1000 100 $10 Year...
Suppose an economy has only three goods and the typical family purchases the amounts given in...
Suppose an economy has only three goods and the typical family purchases the amounts given in the following table. The base year is 2012. Product Quantity (2012) Price (2012) Price (2017) Hair cuts 6 $50 $80 Backpacks 4 $25 $30 Tacos 100 $1.00 $5.00 b. Compute the cost of consumption basket in 2012 and 2017 using base year quantities. c. What is the CPI for in 2017? d. What is the inflation rate between 2012 and 2017?
In an economy, there are only two goods (Cars and cycles) produced. The data for last...
In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017. year Price of Car(AED) Number of Car Price of cycle (AED) Number of cycle 2017...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT