Table 19-6

A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2011 are shown in the table above.
-Refer to Table 19-6. What is the GDP deflator in 2011 if 2011 is the base year?

Question

Table 19-6
  
A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2011 are shown in the table above.
-Refer to Table 19-6. What is the GDP deflator in 2011 if 2011 is the base year?

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate the nominal GDP and real GDP for both years. 
Nominal GDP for 2011 = (50 x 120) + (100 x 250) + (150 x 25) = 6000 + 25000 + 3750 = 34750 
Real GDP for 2011 (using 2011 as the base year) = (50 x 120) + (100 x 250) + (150 x 25) = 6000 + 25000 + 3750 = 34750 
GDP deflator for 2011 = (Nominal GDP / Real GDP) x 100 = (34750 / 34750) x 100 = 100

Table 19-6 A Very Simple Economy Produces Three Goods: Cameras, Legal Services