Table 8-18
A very simple economy produces three goods: cameras,legal services,and books.The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above.
-Refer to Table 8-18.What is the GDP deflator in 2013 if 2013 is the base year?

Question

Table 8-18
  A very simple economy produces three goods: cameras,legal services,and books.The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above.
-Refer to Table 8-18.What is the GDP deflator in 2013 if 2013 is the base year?

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate nominal GDP and real GDP for both years. Using the given prices and quantities, we have:

Nominal GDP 2008 = (400 x $10) + (100 x $500) + (2000 x $20) = $38,000
Real GDP 2008 = (400 x $10) + (100 x $200) + (2000 x $10) = $24,000
GDP Deflator 2008 = (Nominal GDP 2008 / Real GDP 2008) x 100 = 158.33

Nominal GDP 2013 = (600 x $15) + (200 x $750) + (2500 x $25) = $101,250
Real GDP 2013 = (600 x $10) + (200 x $200) + (2500 x $20) = $67,000
GDP Deflator 2013 = (Nominal GDP 2013 / Real GDP 2013) x 100 = 150

Finally, to get the GDP deflator in 2013 if 2013 is the base year, we simply divide the GDP deflator in 2013 by 100, giving us:

GDP Deflator 2013 (Base Year 2013) = 1.5 x 100 = 150

Table 8-18 a Very Simple Economy Produces Three Goods: Cameras,legal