Question 2. The value of economic activity: GDP An economy has produced 50 cars and 10 planes in 2021. The price of a car that year was 20, the price of a plane 100. By comparison, in 2020, the price of a car was 18 and the price of a plane 90. (a) Find the nominal and the real GDP of the economy in 2021.
Gross domestic product measures the market value of final goods and services produced by an economy during a given period of time.
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Nominal GDP measures the market value of final goods or services at the current year's price.
Nominal GDP = Quantity of current year * Price of the current year.
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Real GDP measures the market value of final goods or services at base year price.
Real GDP = Quantity of current year * Price of the base year.
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GDP deflator measures the overall change in price level relative to the base year.
GDP deflator = (Nominal GDP / Real GDP)
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