Question

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.

What is nominal GDP for year 1, year 2, year 3?

Answer 1

The GDP for year 1, year 2, and year 3 is $12, $20 and, $30 respectively.

Step-by-step explanation:

The nominal GDP is the value of goods and services produced in an economy in a year.

Here, the economy produces only chocolate bars. So we can find nominal GDP by calculating the value of chocolate bars produced in each year.

Nominal GDP for year 1

=
`Price\ *\ Quantity`

=
`3\ *\ 4`

=$12

Nominal GDP for year 2

=
`Price\ *\ Quantity`

=
`4\ *\ 5`

=$20

Nominal GDP for year 3

=
`Price\ *\ Quantity`

=
`5\ *\ 6`

=$30