(Table) The associated table provides a hypothetical bundle of goods. If 2014 is selected as the base year, the value of the GDP deflator in 2017 would be: $$\begin{array} { | l | c | c | c | c | c | c | }
\hline \text { Product } & \mathbf { Q } _ { 2010 } & \mathbf { Q } _ { 2014 } & \mathbf { Q } _ { 2017 } & \mathbf { P } _ { 2010 } & \mathbf { P } _ { 2014 } & \mathbf { P } _ { 2017 } \
\hline \text { Apples (5-lb. bag) } & 10 & 11 & 12 & \$ 3.00 & \$ 4.00 & \$ 4.25 \
\hline \text { Coffee beans (1-lb. bag) } & 50 & 50 & 55 & \$ 8.00 & \$ 9.00 & \$ 10.00 \
\hline \text { Cereal (28-oz. box) } & 20 & 25 & 29 & \$ 3.50 & \$ 3.75 & \$ 3.75 \
\hline
\end{array}$$
A) 100.00.
B) 108.90.
C) 88.50.
D) 105.00.

Question

(Table) The associated table provides a hypothetical bundle of goods. If 2014 is selected as the base year, the value of the GDP deflator in 2017 would be: $$\begin{array} { | l | c | c | c | c | c | c | } 
\hline \text { Product } & \mathbf { Q } _ { 2010 } & \mathbf { Q } _ { 2014 } & \mathbf { Q } _ { 2017 } & \mathbf { P } _ { 2010 } & \mathbf { P } _ { 2014 } & \mathbf { P } _ { 2017 } \
\hline \text { Apples (5-lb. bag) } & 10 & 11 & 12 & \$ 3.00 & \$ 4.00 & \$ 4.25 \
\hline \text { Coffee beans (1-lb. bag) } & 50 & 50 & 55 & \$ 8.00 & \$ 9.00 & \$ 10.00 \
\hline \text { Cereal (28-oz. box) } & 20 & 25 & 29 & \$ 3.50 & \$ 3.75 & \$ 3.75 \
\hline
\end{array}$$
A) 100.00.
B) 108.90.
C) 88.50.
D) 105.00.

Quizplus · Accepted Answer

The GDP deflator is calculated as the ratio of nominal GDP to real GDP, multiplied by 100. Nominal GDP is the value of all goods and services produced in an economy in a given year, using current prices. Real GDP is the value of all goods and services produced in an economy in a given year, using constant prices. In this case, the base year is 2014, so the prices used to calculate real GDP are the prices in 2014.To calculate nominal GDP, we multiply the quantity of each good produced in 2017 by its price in 2017. This gives us the following:Nominal GDP = (12 * $4.25) + (55 * $10.00) + (29 * $3.75) = $652.50To calculate real GDP, we multiply the quantity of each good produced in 2017 by its price in 2014. This gives us the following:Real GDP = (12 * $4.00) + (55 * $9.00) + (29 * $3.75) = $600.00The GDP deflator is then calculated as follows:GDP deflator = (Nominal GDP / Real GDP) * 100GDP deflator = ($652.50 / $600.00) * 100GDP deflator = 108.90Therefore, the value of the GDP deflator in 2017 would be 108.90.

(Table) the Associated Table Provides a Hypothetical Bundle of Goods