Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is:
A) $100.
B) $650.
C) $700.
D) $500.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the current year's quantity of goods produced by the current year's prices. This year, the economy produced 15 DVDs at $10 each (15 * $10 = $150) and 10 DVD players at $50 each (10 * $50 = $500). Adding these amounts gives a nominal GDP of $650 for this year.

Consider an Economy That Produces Only DVDs and DVD Players