The following table shows prices and quantities in the hypothetical economy of Lowlands for two different items in two different years. Assume these are the only two items produced in this economy.

a. What is the value of nominal GDP for Lowlands in year 1? $

b. What is the value of nominal GDP for Lowlands in year 2? $

c. Assume year 1 is used as the base year for this economy. What is the value of real GDP in year 2?

d. In Lowlands, the value of output in year 2 would be (Click to select understand overstated the same). If nominal GDP were used instead of real GDP

Transcribed Image Text:

Good Apples Shirts Price $ 1.25 12.00 Year 1 Output 500 100 Price $ 1.50 14.00 Year 2 Output 560 120 Good Apples Shirts Price $ 1.25 12.00 Year 1 Output 500 100 Price $ 1.50 14.00 Year 2 Output 560 120

Answer rating: 100% (QA)

Year 1 Year 2 P Q P Q Apple 125 500 15 560 Shirt 12 100 ... View the full answer