An economy produces three goods: cars, computers, and oranges. Quantities and prices per unit for years 2009 and 2010 are as follows:

a. What is nominal GDP in 2009 and in 2010? By what percentage does nominal GDP change from 2009 to 2010?

b. Using the prices for 2009 as the set of common prices, what is real GDP in 2009 and in 2009? By what percentage does real GDP change from 2009 to 2010?

c. Using the prices for 2010 as the set of common prices, what is real GDP in 2009 and in 2010? By what percentage does real GDP change from 2009 to 2010?

d. Why are the two output growth rates constructed in (b) and (c) different? Which one is correct? Explain your answer.

Transcribed Image Text:

Cars Computers Oranges 2009 Quantity Price 10 4 1,000 $2,000 $1,000 $1 2010 Quantity Price $3,000 $500 $1 12 6 1,000