Suppose an economy produces three goods apple orange and ban

.Suppose an economy produces three goods: apple, orange, and banana. In 2015, the

economy produces 1000 tonnes of apples, 2000 tonnes of oranges, and 3000 tonnes of banana, and the market prices (in 2015 dollars) are $3 per tonne, $2 per tonne, and $1 per tonne, respectively. In 2016, the production is 2000 tonnes for all three goods, and the market price (in 2016 dollars) is $2 per tonne for all goods. Now compute (a) real GDP for 2015 and 2016, using 2015 as the base year;   (b) a GDP deator from 2015 to 2016, using again 2015 as the base year.

Solution

2015

Real gdp using 2015 as base year

RGDP for 2015= Q₂₀₁₅ XP₂₀₁₅

APPLE = 1000X3= 3000

ORANGE=2000X2= 4000

BANANA= 3000X1=3000

TOTAL = 10,000-RGDP FOR 2015

RGDP FOR 2016 USING 2015 AS BASE YEAR

RGDP₂₀₁₆= Q₂₀₁₆X P₂₀₁₅

APLLE= 2000 X 3= 6000

ORANGE=2000X 2= 4000

BANANA= 2000 X 1= 2000

TOTAL = 12000- RGDP₂₀₁₆

- FOR THE BASE YEAR NOMINAL GDP = REAL GDP

RGDP₂₀₁₅= NGDP2015= 10,000

NOMINAL GDP FOR 2016 = APPLE = 2000 X 2 = 4000

ORANGE= 2000 X 2 = 4000

BANANA= 2000 X 2 = 4000

TOTAL= 12000- NGDP₂₀₁₆

GDP DEFLATOR= NGDP/RGDP X100

GDP DEFLATOR 2015= NGDP₂₀₁₅ /RGDP₂₀₁₅ X 100

10,000/10,000 X 100= 100

GDP DEFLATOR 2016 USING 2015 AS BASE YEAR= NGDP₂₀₁₆/RGDP₂₀₁₅X100

= 12000/10,000 X 100= 120