Question

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. The value of nominal GDP in years 1 and 2, respectively, is:

$1,000 and $1,005.
$900 and $1,077.50.
$180,000 and $257,400.
$900 and $990.

Answer 1

$900 and $1,077.50.

Step-by-step explanation:

The computation of the Nominal GDP for year 1 and the year 2 is shown below:

Nominal GDP for year 1:

= Number of golf balls × selling price + Number of pizzas × selling price

= 100 golf balls × $3 + 75 pizzas × $8

= $300 + $600

= $900

Nominal GDP for year 2:

= Number of golf balls × selling price + Number of pizzas × selling price

= 110 golf balls × $3.25 + 80 pizzas × $9

= $357.50 + $720

= $1077.50