The table below presents data for GDP for the years 2000 and

The table below presents data for GDP for the years 2000 and 2013, assuming that the economy produces two final products: bourbon and coke. Calculate nominal and real GDP for both years. Assume the base year is 2000. Where it is the case, pease report only the first two decimals without rounding anything up. Figures without decimals should be reported as they are.

Table 1

Year

Bourbon

Coke

P

Q

P

Q

2000

$19.75

200

$5.00

500

2013

$21.50

210

$5.15

495

GDP for year 2000 is ;

real GDP for year 2000 is ;

GDP for year 2013 is ;

real GDP for year 2013 is ;

Solution

First of all it is very good question:

Let me explain you how real GDP is calculated

In 2013 if you want to know real GDP you must consider price levels of 2000, or price levels of base year

If you consider price levels of base year then you have esentially eliminated inflation,

Real GDP is nothing but Nominal GDP - Inflation, It will remove effects of price rise

Now coming to the calculation

GDP for year 2000= 19.75*200+ 5.00*500 = 6450

Real GDP for year 2000 is 6450 ( Real GDP of base year is always equal to nominal GDP)

GDP for year 2013 = 21.50*210 + 5.15*495 = 7.64.25

Nominal GDP for year 2013 = 210*19.75 + 495 *5.00 = 6622.5

In this you must notice we have used quantity of year 2013 and price of year 2000

Any questions please get back.