Question

(Scenario: Real GDP) Scenario: Real GDP 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. Look at the scenario Real GDP. The value of nominal GDP in years 1 and 2 respectively is:

Answer 1

$900; $1,077.5

Step-by-step explanation:

Given that,

In year 1:

An economy produces 100 golf balls that sell for $3 each and,

75 pizzas that sell for $8 each.

In year 2:

An economy produces 110 golf balls that sell for $3.25 each and,

80 pizzas that sell for $9 each.

Nominal GDP refers to the total value of production of goods and services in an economy during a year.

Nominal GDP in year 1:

= (Number of golf balls produced × Price of each golf ball) + (Number of pizzas produced × Price of each pizza)

= (100 × $3) + (75 × $8)

= $300 + $600

= $900

Nominal GDP in year 2:

= (Number of golf balls produced × Price of each golf ball) + (Number of pizzas produced × Price of each pizza)

= (110 × $3.25) + (80 × $9)

= $357.5 + $720

= $1,077.5