Table 12-18
$\begin{array}{|c|c|c|c|c|}
\hline & 2013 & & 2018 & \
\hline \text { Product } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline \text { Camera } & 100 & \$ 10 & 120 & \$ 12 \
\hline \text { Legal services } & 50 & 15 & 45 & 20 \
\hline \text { Books } & 200 & 40 & 210 & 45 \
\hline
\end{array}$ A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.
-Refer to Table 12-18.What is the GDP deflator in 2013 if 2018 is the base year?

Question

Table 12-18
 $\begin{array}{|c|c|c|c|c|}
\hline & 2013 & & 2018 & \
\hline \text { Product } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline \text { Camera } & 100 & \$ 10 & 120 & \$ 12 \
\hline \text { Legal services } & 50 & 15 & 45 & 20 \
\hline \text { Books } & 200 & 40 & 210 & 45 \
\hline
\end{array}$ A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.
-Refer to Table 12-18.What is the GDP deflator in 2013 if 2018 is the base year?

Quizplus · Accepted Answer

Using the formula for GDP deflator: 
GDP deflator = (Nominal GDP / Real GDP) x 100

To calculate the real GDP for 2013, we use the prices from 2018 as the base year:

Real GDP for 2013 = (100 cameras x $12 per camera) + (50 legal services x $20 per legal service) + (200 books x $45 per book) = $6,400

Nominal GDP for 2013 = (100 cameras x $10 per camera) + (50 legal services x $15 per legal service) + (200 books x $40 per book) = $6,500

Therefore, GDP deflator for 2013 using 2018 as the base year = ($6,500 / $6,400) x 100 = 101.5625

Now, to answer the question, we need to find the GDP deflator for 2013 using 2018 as the base year. The closest option is B) 87.

Table 12-18 A Very Simple Economy Produces Three Goods: Cameras, Legal Services