In: Economics
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 |
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