Suppose an economy produces only eggs and ham.In 2005,100 dozen eggs are sold at $3 per dozen and 50 pounds of ham are sold at $4 per pound.In 2004,the base year,eggs sold at $1.50 per dozen and ham sold at $5 per pound.For 2005,

Question

Quizplus · Accepted Answer

Nominal GDP for 2005 can be calculated as:
(100 dozens eggs x $3/dozen) + (50 pounds of ham x $4/pound) = $300 + $200 = $500

Real GDP for 2005 can be calculated using the prices from the base year (2004):
(100 dozens eggs x $1.50/dozen) + (50 pounds of ham x $5/pound) = $150 + $250 = $400

The GDP deflator can be calculated as (Nominal GDP/ Real GDP) x 100:
($500/$400) x 100 = 125

Therefore, the correct answer is D.

Suppose an Economy Produces Only Eggs and Ham