Texts: Use the information below to complete the charts in problems 1-2.
In 2020, the economy produces 200 tubs of ice cream that sell for $1 each and 50 pairs of jeans that sell for $10 each. In 2021, the economy produces 220 tubs of ice cream that sell for $1 each and 50 pairs of jeans that sell for $11 each. 2020 is the base year.
1. Instructions: Calculate the nominal GDP, Real GDP, and GDP Deflator each year. Type your answers into the chart below by the corresponding year.
Nominal GDP
Year 2020: $<<200*1+50*10=700>>700
Year 2021: $<<220*1+50*11=770>>770
Real GDP
Year 2020: $<<200*1+50*10=700>>700
Year 2021: $<<200*1+50*11=750>>750
GDP Deflator
Year 2020: <<(700/700)*100=100>>100
Year 2021: <<(770/750)*100=102.67>>102.67
2. Instructions: Calculate the percentage change for the following three statistics from 2020 to 2021. Type your answers in the chart below.
Percentage Change in Nominal GDP: <<((770-700)/700)*100=10%>>10%
Percentage Change in Real GDP: <<((750-700)/700)*100=7.14%>>7.14%
Percentage Change in GDP Deflator: <<((102.67-100)/100)*100=2.67%>>2.67%
Use the information from the charts you completed above to answer this problem set.
3. From 2020-2021, prices rose approximately what percentage?
Prices rose approximately 2.67%.
4. Was the increase in nominal GDP from 2020-2021 mostly due to an increase in real output?
Yes, the increase in nominal GDP from 2020-2021 was mostly due to an increase in real output.