Refer to the following table when answering the following questions. In this economy, only two goods are produced: video games and pistachios.
Table 2.3: National Income Accounting
-Consider Table 2.3. Using the Laspeyres index, the percent change in nominal GDP was about:
A) 5 percent.
B) 1 percent.
C) 6 percent.
D) 0 percent.
E) Not enough information is given.

Question

Refer to the following table when answering the following questions. In this economy, only two goods are produced: video games and pistachios.
Table 2.3: National Income Accounting 
-Consider Table 2.3. Using the Laspeyres index, the percent change in nominal GDP was about:
A) 5 percent. 
B) 1 percent. 
C) 6 percent. 
D) 0 percent. 
E) Not enough information is given.

Quizplus · Accepted Answer

The Laspeyres index uses base-year quantities to calculate changes in nominal GDP, which were 500 units of video games and 1,000 units of pistachios in this case. Nominal GDP in Year 2 was 550 x 5 + 1,200 x 4 = $9,800 and in Year 1 it was 500 x 5 + 1,000 x 4 = $7,000. Therefore, the percentage change in nominal GDP using the Laspeyres index is [(9,800 - 7,000) / 7,000] x 100% = 40/7 % ≈ 5.71%, which is closest to answer choice (C) 6 percent.

Refer to the Following Table When Answering the Following Questions