Question 3) GDP, based on a problem from “Principles of Economics” by N. Gregory Mankiw The economy produces two goods, pineapples and smoke detectors. Information on production and prices is presented in the table below. Year Price of Pineapples Quantity of Pineapples Price of Smoke Detectors Quantity of Smoke Detectors 1 6 950 100 45 2 4 1400 120 50 3 5 1200 110 55 4 6 1100 110 60 a) For each year, calculate the nominal GDP, the real GDP, and the GDP deflator. Use year 1 as the base year. b) Calculate the percentage change in real GDP from year 1 to year 2, from year 2 to year 3, and from year 3 to year 4. Which year was the best for the economic well-being of the country? c) For each year, calculate the contribution of pineapple industry to real GDP (the share of real GDP that comes from the production of pineapples). d) Using GDP deflator, calculate the inflation rate. Which year had the highest inflation rate? e) The price of smoke detectors increased from $100 in year 1 to $120 in year 2. Explain why the inflation rate is not the highest during this period.
Question 3)
The economy produces two goods, pineapples and smoke detectors. Information on production
and prices is presented in the table below.
| Year | Quantity of Pineapples | Price of Smoke Detectors | Quantity of Smoke Detectors | |
| 1 | 6 | 950 | 100 | 45 |
| 2 | 4 | 1400 | 120 | 50 |
| 3 | 5 | 1200 | 110 | 55 |
| 4 | 6 | 1100 | 110 | 60 |
a) For each year, calculate the nominal GDP, the real GDP, and the GDP deflator. Use year 1 as
the base year.
b) Calculate the percentage change in real GDP from year 1 to year 2, from year 2 to year 3, and
from year 3 to year 4. Which year was the best for the economic well-being of the country?
c) For each year, calculate the contribution of pineapple industry to real GDP (the share of real
GDP that comes from the production of pineapples).
d) Using GDP deflator, calculate the inflation rate. Which year had the highest inflation rate?
e) The price of smoke detectors increased from $100 in year 1 to $120 in year 2. Explain why
the inflation rate is not the highest during this period.
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Question 3)
The economy produces two goods, pineapples and smoke detectors. Information on production
and prices is presented in the table below.
| Year | Quantity of Pineapples | Price of Smoke Detectors | Quantity of Smoke Detectors | |
| 1 | 6 | 950 | 100 | 45 |
| 2 | 4 | 1400 | 120 | 50 |
| 3 | 5 | 1200 | 110 | 55 |
| 4 | 6 | 1100 | 110 | 60 |
a) For each year, calculate the nominal GDP, the real GDP, and the GDP deflator. Use year 1 as
the base year.
b) Calculate the percentage change in real GDP from year 1 to year 2, from year 2 to year 3, and
from year 3 to year 4. Which year was the best for the economic well-being of the country?
c) For each year, calculate the contribution of pineapple industry to real GDP (the share of real
GDP that comes from the production of pineapples).
d) Using GDP deflator, calculate the inflation rate. Which year had the highest inflation rate?
e) The price of smoke detectors increased from $100 in year 1 to $120 in year 2. Explain why
the inflation rate is not the highest during this period.
Need D and E
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