Consider an economy with two goods books and burritos The ta

Consider an economy with two goods; books and burritos. The table below includes the annual output of each good for five years as well as the price of each good in each year. .

Solution

Year books P(books) Burritos P(Burritos) Nominal GDP Real GDP 1970 50 10 500 1 1000 1000 1971 47 12 600 2 1764 1070 1972 31 15 550 3 2115 860 1973 35 15 700 3 2625 1050 1974 45 14 700 4 3430 1150 *Keeping 1970 as the base year for real GDP calculation As see from the table, Economy has evolved in terms of real GDP from 1000 to 1150, that’s (150/1000*100) = 15% growth.