Suppose an economy's production consists only of corn and soybeans.In 2005,20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel.In 2004,the price of corn was $2 per bushel and the price of soybeans was $1 per bushel.Using 2004 as the base year,it follows that,for 2005,

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Quizplus · Accepted Answer

Nominal GDP for 2005 = (20 x $4) + (10 x $2) = $80 + $20 = $100
Real GDP for 2005 using 2004 as the base year = (20 x $2) + (10 x $1) = $40 + $10 = $50
GDP deflator for 2005 = (Nominal GDP/Real GDP) x 100 = ($100/$50) x 100 = 200

Suppose an Economy's Production Consists Only of Corn and Soybeans