Final answer:
To calculate nominal GDP for year 2, multiply the prices of books and cheese by their respective quantities. Calculate real GDP by using year 1 as the base year. Divide nominal GDP by real GDP and multiply by 100 to calculate the GDP deflator. Divide the prices of books and cheese in year 2 by their respective prices in year 1 and multiply by 100 to calculate the CPI. The workers' real wages would decrease from year 1 to year 2 based on the CPI.
Step-by-step explanation:
To calculate the nominal gross domestic product (GDP) for year 2, we multiply the price of books by the quantity of books and the price of cheese by the quantity of cheese. This gives us ($6 x 10) + ($5 x 20) = $60 + $100 = $160.
To calculate the real GDP for year 2 using year 1 as the base year, we multiply the price of books in year 1 by the quantity of books in year 2 and the price of cheese in year 1 by the quantity of cheese in year 2. This gives us ($4 x 10) + ($10 x 20) = $40 + $200 = $240.
The GDP deflator for year 2 is calculated by dividing the nominal GDP by the real GDP and multiplying by 100. This gives us ($160 / $240) x 100 = 66.7.
The consumer price index (CPI) for year 2, assuming the market basket is composed of the quantities in year 1, is calculated by dividing the price of books in year 2 by the price of books in year 1 and multiplying by 100, and dividing the price of cheese in year 2 by the price of cheese in year 1 and multiplying by 100. This gives us ($6 / $4) x 100 = 150 and ($5 / $10) x 100 = 50.
Based on the CPI, the book and cheese workers' real wages would decrease from year 1 to year 2 as the CPI increased, indicating that the prices of books and cheese increased faster than their wages.