Table 4.2
-Refer to Table 4.2.Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup.Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households.Using the information in the above table, nominal GDP for this simple economy equals

Question

Table 4.2 
-Refer to Table 4.2.Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup.Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households.Using the information in the above table, nominal GDP for this simple economy equals

Quizplus · Accepted Answer

Nominal GDP is the sum of the total value of all final goods and services produced in an economy during a particular period, using their current market prices. From the table, the market price and quantities produced for each good are given. To calculate nominal GDP, we need to multiply the price and quantity for each good, add them up and account for the tomatoes used in making ketchup. Thus, nominal GDP = (150*20) + (15*200) + (5*100) + [(3*100)+ (1.5*50)] = 3,000 + 3,000 + 500 + 450 = $6,950. However, we need to adjust for the double-counting of tomatoes. Therefore, the corrected nominal GDP = $6,950 - $550 (half the value of ketchup production) = $6,400.

Table 4.2 -Refer to Table 4.2.Suppose That a Simple Economy Produces Only