ne table below contains prices and output for a two good eco

ne table below contains prices and output for a two good economy. Nominal and real GDP in 2013 are both $58,250. Use the information in the table to answer the following questions. Shirts Pants Price Quantity Price Quantity Year 2013 $5.50 1500 $10.00500 2014 7.50 1500$15.00 000 1. What is nominal GDP in 2014? 2. What is real GDP in 2014? Use 2013 as the base year. Number 3. Real output from 2013 to 2014 has: 8 O experienced inflation. O decreased. O stayed the same. O increased

Solution

1. Nominal GDP in 2014 = Price of shirt in 2014 x Quantity + Price of Pants in 2014 x Quantity

= 7.5 x 1500 + 15 x 4000 = 11,250 + 60,000 = 71,250

2. Real GDP in 2014 = Price of shirt in 2013 x Quantity in 2014 + Price of Pants in 2013 x Quantity in 2014

= 5.5 x 1500 + 10 x 4000 = 8250 + 40,000 = 48,250

3. Real output decreases.