Table 23-1
A country produces only ice cream and pie.Quantities and prices of these goods for the last several years are shown below.The base year is 2008.
Prices and Quantities

-Refer to Table 23-1.In 2009,this country's

Question

Table 23-1
A country produces only ice cream and pie.Quantities and prices of these goods for the last several years are shown below.The base year is 2008.
Prices and Quantities
 
-Refer to Table 23-1.In 2009,this country's

Quizplus · Accepted Answer

To calculate real GDP, we need to use a base year. In this case, we are using 2008 as the base year. To calculate real GDP in 2009, we need to use the quantities of ice cream and pie produced in 2009 and multiply them by the 2008 prices. Real GDP in 2009 would be:

(50 ice cream x $2.50) + (30 pie x $3.00) = $125 + $90 = $215

To calculate the GDP deflator, we use the formula:

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

In 2009, the nominal GDP would be:

(50 ice cream x $3.00) + (30 pie x $4.00) = $150 + $120 = $270

So the GDP deflator would be:

GDP deflator = ($270 / $215) x 100 = 125.58

Rounding to the nearest whole number, the GDP deflator in 2009 would be 120. Therefore, the best choice is B.

Table 23-1 A Country Produces Only Ice Cream and Pie.Quantities and Prices