Consider the following information about a simple country that produces two different goods: Year Price Quantity Price Quantity Milk Milk Cereal Cereal 2014 $4 200 $5 300 2015 $4.25 250 $5.50 330 2016 $4.50 300 $6.00 350 Assume the base year is 2014. If we were to calculate nominal GDP and real GDP for 2015 and 2016 we would find: real GDP is larger than nominal GDP in 2015 and nominal GDP is larger than real GDP in 2016. nominal GDP for each of these years is larger than real GDP. real GDP is larger than nominal GDP in 2016 and nominal GDP is larger than real GDP in 2015. real GDP for each of these years is larger than nominal GDP.

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