Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2012), the production and price data were as follows: Fruit Quantity Price Apples 3,000 bags $2 per bag Bananas 6,000 bunches $3 per bunch Pineapples 4,000 $1.5 per Oranges 8,000 bags $4 per bag In the current year(2013), the production and price data are follows: Fruit Quantity Price Apples 4,000 bags $3 per bag Bananas 14,000 bunches $2 per bunch Pineapples 7,500 $2 per Oranges 32,000 bags $5 per bag (a) Calculate the nominal GDP in the current year and the base year. What is the percentage increase since the base year? (b) Calculate the real GDP in the current year and the base year. By what percentage does real GDP increase from the base year to the current year? (c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?
Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2012), the production and price data were as follows: Fruit Quantity Price Apples 3,000 bags $2 per bag Bananas 6,000 bunches $3 per bunch Pineapples 4,000 $1.5 per Oranges 8,000 bags $4 per bag In the current year(2013), the production and price data are follows: Fruit Quantity Price Apples 4,000 bags $3 per bag Bananas 14,000 bunches $2 per bunch Pineapples 7,500 $2 per Oranges 32,000 bags $5 per bag (a) Calculate the nominal GDP in the current year and the base year. What is the percentage increase since the base year? (b) Calculate the real GDP in the current year and the base year. By what percentage does real GDP increase from the base year to the current year? (c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2012), the production and
| Fruit | Quantity | Price |
| Apples | 3,000 bags | $2 per bag |
| Bananas | 6,000 bunches | $3 per bunch |
| Pineapples | 4,000 | $1.5 per |
| Oranges | 8,000 bags | $4 per bag |
| In the current year(2013), the production and price data are follows: | ||
| Fruit | Quantity | Price |
| Apples | 4,000 bags | $3 per bag |
| Bananas | 14,000 bunches | $2 per bunch |
| Pineapples | 7,500 | $2 per |
| Oranges | 32,000 bags | $5 per bag |
(a) Calculate the nominal GDP in the current year and the base year. What is the percentage increase since the base year?
(b) Calculate the real GDP in the current year and the base year. By what percentage does real GDP increase from the base year to the current year?
(c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?
(d) Would you say that the percentage increase in nominal GDP in this economy since the base year is due more to increases in prices or increases in the physical volume of output?
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