Assume there are only two goods in the economy, french fries and onion rings. In 2015, 1,000,000

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Assume there are only two goods in the economy, french fries and onion rings. In 2015, 1,000,000 servings of french fries were sold at $0.40 each and 800,000 servings of onion rings at $0.60 each. From 2015 to 2016 the price of french fries rose by 25%

and the servings sold fell by 10%; the price of onion rings fell by 15% and the servings sold rose by 5%.

a. Calculate nominal GDP in 2015 and 2016. Calculate real GDP in 2016 using 2015 prices.

b. Why would an assessment of growth using nominal GDP be misguided?

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Essentials Of Economics

ISBN: 9781319221317

5th Edition

Authors: Paul Krugman, Robin Wells

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