Suppose an economy produces only iPhones and bananas.In 2010,1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound.In 2009,the base year,iPhones sold at $400 each and bananas sold at $2 per pound.For 2010,

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Nominal GDP is the value of all final goods and services produced in an economy in a given year, valued at current prices. In 2010, the nominal GDP is $315,000 (1000 iPhones x $300 + 5000 pounds of bananas x $3).Real GDP is the value of all final goods and services produced in an economy in a given year, valued at constant prices. In 2010, the real GDP is $410,000 (1000 iPhones x $400 + 5000 pounds of bananas x $2).The GDP deflator is a measure of the overall price level of goods and services in an economy. It is calculated by dividing nominal GDP by real GDP and multiplying by 100. In 2010, the GDP deflator is 76.83 ($315,000/$410,000 x 100).

Suppose an Economy Produces Only IPhones and Bananas