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Scenario: Real GDP
Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each.
-(Scenario: Real GDP) Look at the scenario Real GDP. The value of nominal GDP in years 1 and 2 respectively is:
A)$900 and $1,077.50.
B)$900 and $990.
C)$180,000 and $257,400.
D)$1,000 and $1,005.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the quantity of goods produced by their current prices. In year 1, nominal GDP = (100 golf balls * $3) + (75 pizzas * $8) = $300 + $600 = $900. In year 2, nominal GDP = (110 golf balls * $3.25) + (80 pizzas * $9) = $357.50 + $720 = $1,077.50.

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