A simple economy produces two goods, Pumpkin Pies and Computer Games. Price and quantity data are as follows:Production and Prices in Year 1 (Base year)ProductQuantityPrice Per UnitPumpkin PiesComputer Games125$1.00750$40.00Production and Prices in Year 2ProductQuantityPrice Per UnitPumpkin PiesComputer Games156.25$1.501,125.00$80.00In Year 2, nominal GDP is equal to: $and real GDP is $(enter both responses rounded to the nearest penny).

Answered: A simple economy produces two goods,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A simple economy produces two goods, Pumpkin Pies and Computer Games. Price and quantity data are as follows:
Production and Prices in Year 1 (Base year)
Product
Quantity
Price Per Unit
Pumpkin Pies
Computer Games
125
$1.00
750
$40.00
Production and Prices in Year 2
Product
Quantity
Price Per Unit
Pumpkin Pies
Computer Games
156.25
$1.50
1,125.00
$80.00
In Year 2, nominal GDP is equal to: $
and real GDP is $
(enter both responses rounded to the nearest penny).

Expert Solution

Step 1

Nominal GDP is the market value of goods and services produced in an economy, unadjusted for inflation. Real GDP is the market value of goods and services produced, adjusted for inflation to reflect changes in real output.

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