Erehwon is a country where the only products produced were A & B, over 3 years, 2013. 2014 & 2015. What was the Nominal GDP for 2013, 2014, & 2015? Using 2013 as your base year, what was the real GDP in 2014, & 2015? What was the GDP deflator for 2014?
Year Qty of A Price of A ($) Qty of B Price of B($)
2013 400 5 300 10
2014 500 6 250 12
2015 600 7 200 15
To find the nominal GDP for each year, we need to multiply the quantity of each product by its respective price and sum them up.
2013 Nominal GDP = (Quantity of A x Price of A) + (Quantity of B x Price of B)
= (400 x $5) + (300 x $10)
= $2,000 + $3,000
= $5,000
2014 Nominal GDP = (Quantity of A x Price of A) + (Quantity of B x Price of B)
= (500 x $6) + (250 x $12)
= $3,000 + $3,000
= $6,000
2015 Nominal GDP = (Quantity of A x Price of A) + (Quantity of B x Price of B)
= (600 x $7) + (200 x $15)
= $4,200 + $3,000
= $7,200
To find the real GDP, we need to use the base year (2013) as the reference and multiply the quantity of each product by the base year's price. Then, we sum them up.
2014 Real GDP = (Quantity of A x Price of A in 2013) + (Quantity of B x Price of B in 2013)
= (500 x $5) + (250 x $10)
= $2,500 + $2,500
= $5,000
2015 Real GDP = (Quantity of A x Price of A in 2013) + (Quantity of B x Price of B in 2013)
= (600 x $5) + (200 x $10)
= $3,000 + $2,000
= $5,000
To find the GDP deflator, we need to compare the nominal GDP to the real GDP and calculate the ratio.
2014 GDP Deflator = (Nominal GDP / Real GDP) x 100
= ($6,000 / $5,000) x 100
= 120
Therefore, the nominal GDP for 2013, 2014, and 2015 is $5,000, $6,000, and $7,200 respectively. The real GDP for 2014 and 2015 is $5,000 for both years. The GDP deflator for 2014 is 120.