For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is
consumed in each year, and that price and quantity data are given in the table below. $$\begin{array}{l}
\text { Year } 1\
\begin{array} { | l | c | c | }
\hline \text { Good } & \text { Quantity } & \text { Price } \
\hline \text { Bread } & 30 & \$ 10 \
\hline \text { Computers } & 10 & \$ 50 \
\hline
\end{array}\\
\begin{array} { l }
{ \text { Year 2 } } \
\begin{array} { | l | c | c | }
\hline \text { Good } & \text { Quantity } & \text { Price } \
\hline \text { Bread } & 40 & \$ 15 \
\hline \text { Computers } & 30 & \$ 60 \
\hline
\end{array}
\end{array}
\end{array}$$
-If Year 1 is the base year, the GDP price deflator for Year 2 is approximately
A)181.0.
B)131.3.
C)126.3.
D)211.0.
E)100.0.

Question

For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is
consumed in each year, and that price and quantity data are given in the table below. $$\begin{array}{l}
\text { Year } 1\
\begin{array} { | l | c | c | } 
\hline \text { Good } & \text { Quantity } & \text { Price } \
\hline \text { Bread } & 30 & \$ 10 \
\hline \text { Computers } & 10 & \$ 50 \
\hline
\end{array}\\
\begin{array} { l } 
 { \text { Year 2 } } \
\begin{array} { | l | c | c | } 
\hline \text { Good } & \text { Quantity } & \text { Price } \
\hline \text { Bread } & 40 & \$ 15 \
\hline \text { Computers } & 30 & \$ 60 \
\hline
\end{array}
\end{array}
\end{array}$$
-If Year 1 is the base year, the GDP price deflator for Year 2 is approximately
A)181.0.
B)131.3.
C)126.3.
D)211.0.
E)100.0.

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate the nominal GDP and the real GDP for both years.
Nominal GDP in Year 1 = (30 x $10) + (10 x $50) = $800
Real GDP in Year 1 = (30 x $10) + (10 x $10) = $400 (using Year 1 prices)
Nominal GDP in Year 2 = (40 x $15) + (30 x $60) = $2,100
Real GDP in Year 2 = (40 x $10) + (30 x $50) = $1,700 (using Year 1 prices)
Next, we can calculate the GDP deflator for Year 2.
GDP deflator = (Nominal GDP / Real GDP) x 100
GDP deflator in Year 2 = ($2,100 / $1,700) x 100 ≈ 123.5
Therefore, the answer is (C) 126.3, the closest option to 123.5, which is the approximate GDP deflator for Year 2.

For the Following Question(s), Suppose That an Economy Produces Only