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Scenario: Real GDP
Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each.
-(Scenario: Real GDP) Look at the scenario Real GDP. The growth rate of nominal GDP from year 1 to year 2 is:
A)10%.
B)7.8%.
C)19.7%.
D)8.8%.

Question

Quizplus · Accepted Answer

The nominal GDP in year 1 is (100 golf balls * $3) + (75 pizzas * $8) = $300 + $600 = $900. In year 2, it is (110 golf balls * $3.25) + (80 pizzas * $9) = $357.5 + $720 = $1077.5. The growth rate is (($1077.5 - $900) / $900) * 100% = 19.7%.

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