Final answer:
Nominal GDP is calculated using current year prices, while real GDP is adjusted for inflation using the base year's prices. The formula for real GDP is (Nominal GDP / GDP Deflator) x 100. Without specific data for quantities and prices, the actual calculation cannot be performed.
Step-by-step explanation:
To calculate both nominal and real GDP for a given year, one needs to understand the distinction between these two measures. Nominal GDP is the value of all final goods and services produced within a country in a specific year, measured using current prices. To extract the effect of price changes and measure the real volume of production, real GDP is calculated by adjusting nominal GDP for inflation using the base year prices.
To calculate real GDP using 2016 as the base year, the following formula can be used:
Real GDP = (Nominal GDP / GDP Deflator) x 100
Where the GDP deflator represents the ratio of nominal GDP to real GDP expressed as an index (i.e., 100 is the index number for the base year).
Without the actual numeric data for the economy's production of guns and butter, the calculation cannot be completed. However, if the data were provided, you would multiply the quantities of guns and butter produced in each year by their respective prices in 2016 to obtain the nominal GDP for each year.