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TIME
PRICE OF BOOKS QUANTITY OF BOOKS PRICE OF CHEESE Quanity
year 1 $4 15 $10 4
year 2 $6 10 $5 20
The table above shows data for the economy of Mexico, which produces two goods, books and cheese.
1-(a) Calculate the nominal gross domestic product (GDP) for year 2.
1-(b) Using year 1 as the base year, calculate real GDP for year 2.
1-(c) Calculate the GDP deflator for year 2.
1-(d) Assuming the market basket is composed of the quantities in year 1, calculate the consumer price index (CPI) for year 2.
1-(e) Suppose the book and cheese workers received a 2 percent increase in their wages. Based on your answer to part (d), would their real wages increase, decrease, or stay the same from year 1 to year 2 ? Explain.

Sagot :

s8894344

Answer:

Nominal gdp in year 1 = $10

Real gdp in year 1 =  $10

GDP deflator in year 1  = 100

Nominal gdp in year 2 = $32

Real GDP in year 2 =$20

GDP deflator in year 2  =160

Nominal gdp in year 3 =  $60

Real gdp in year 3 =  $30

GDP deflator in year 3   = 200

Explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Nominal GDP is GDP calculated using current year prices while Real GDP is GDP calculated using base year prices. Real GDP has been adjusted for inflation.

Nominal GDP = current year price x quantity produced

Real GDP = base year price x quantity produced

GDP deflator = (nominal GDP / real GDP) x 100

Nominal gdp in year 1 = (2 x $5) = $10

Real gdp in year 1 = (2 x $5) = $10

GDP deflator in year 1  =( $10 /$10 ) x 100 = 100

Nominal gdp in year 2 = (4 x $8) = $32

Real GDP in year 2 = 4 x $5 = $20

GDP deflator in year 2  = ($32 / $20) x 100 = 160

Nominal gdp in year 3 = 6 X $10 = $60

Real gdp in year 3 = 6 x$5 = $30

GDP deflator in year 3  = ($60 / $30) x100  = 200

Explanation:

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