Suppose an economy produces only eggs and ham.In 2009,100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound.In 2010,the base year,eggs sold at $1.50 per dozen and ham sold at $5 per pound.For 2009,

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Nominal GDP for 2009 is calculated using 2009 prices: (100 dozen eggs * $3) + (50 pounds of ham * $4) = $500. Real GDP for 2009 is calculated using 2010 prices: (100 dozen eggs * $1.50) + (50 pounds of ham * $5) = $400. The GDP deflator is (Nominal GDP / Real GDP) * 100 = (500 / 400) * 100 = 125.

Suppose an Economy Produces Only Eggs and Ham