Question

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas), but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year:

a) increased nominal GDP by $20,000, but left real GDP unchanged.
b) increased nominal GDP by $120,000, and increased real GDP by $100,000.
c) left nominal GDP unchanged, but increased real GDP by $20,000.
d) increased nominal GDP by $120,000, but left real GDP unchan

Answer 1

a) increased nominal GDP by $20,000, but left real GDP unchanged.

Step-by-step explanation:

Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.

Nominal GDP is GDP calculated using current year prices.

Real GDP is GDP calculated using base year prices.

Nominal GDP = 1000 × $12 = $12,000

Nominal GDP increased by $12,000 but real GDP remained unchanged because the same amount of pizzas was produced both years.

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