Final answer:
Nominal GDP for any year is calculated using the output of goods and services for that year, multiplied by their prices for the same year. For the base year, which is 2005 in this case, nominal GDP and real GDP are identical because the price index is set at 100. To find the nominal GDP for 2004 or any other year, multiply the quantities produced by the prices in that year.
Step-by-step explanation:
The student is asking how to find the nominal Gross Domestic Product (GDP) for the current year 2005 and for the base year 2004. To address this, we need to understand that nominal GDP is calculated using the current prices of goods and services in the economy without adjusting for inflation. In the case of the base year, which is 2005 in this example, nominal GDP and real GDP are the same because the prices used to calculate real GDP are from 2005 itself. Thus, the price index (or GDP deflator) for the base year is always 100, and as a result, the nominal and real GDP match for that year.
To calculate nominal GDP for any year, including 2004, the formula is:
- Total output of goods and services produced in the economy
- Multiplied by their respective prices in that year
As an example, if an economy produced 100 units of a good priced at $10 each in 2004, the nominal GDP for 2004 would be:
100 units × $10/unit = $1000
To find the nominal GDP for 2005, you would use the quantities of goods and services produced in 2005, and multiply them by their prices in 2005. If the base year is also 2005, comparing nominal GDP and real GDP will indicate no difference due to the base year's price index being set at 100.