Use the following to answer questions:
-(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth of nominal GDP from 2013 to 2014 was due to approximately a _____% increase in prices and approximately a _____% increase in aggregate output.
A) 11.25; 0
B) 0; 45
C) 5; 11.25
D) 6.25; 5

Question

Use the following to answer questions: 
-(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth of nominal GDP from 2013 to 2014 was due to approximately a _____% increase in prices and approximately a _____% increase in aggregate output.
A) 11.25; 0 
B) 0; 45 
C) 5; 11.25 
D) 6.25; 5

Quizplus · Accepted Answer

The growth in nominal GDP reflects both price changes and changes in aggregate output. To separate these effects, we can calculate the percentage increase in prices and output between 2013 and 2014. Assuming a base year allows us to compute real GDP and isolate the impact of price changes from changes in output. The given percentages approximate the contributions of each factor to nominal GDP growth, with prices contributing a 6.25% increase and output contributing a 5% increase.

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