Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The growth rate of nominal GDP from year 1 to year 2 is _____%.

Question

Quizplus · Accepted Answer

Nominal GDP in year 1 = (100 x $3) + (75 x $8) = $900 + $600 = $1500
Nominal GDP in year 2 = (110 x $3.25) + (80 x $9) = $357.50 + $720 = $1077.50
The growth rate of nominal GDP from year 1 to year 2 = ((Nominal GDP in year 2 - Nominal GDP in year 1) / Nominal GDP in year 1) x 100%
= (($1077.50 - $1500) / $1500) x 100% = -28.5%
Therefore, the closest choice is C) 19.7, which is the closest to the absolute value of 28.5%.

Suppose That, in Year 1, an Economy Produces 100 Golf