Question

good quantity produced in 2016 price in 2016 quantity produced in 2017 price in 2017 guitars 20 $50 20 $75 physics books 100 $55 100 $60 sandals 100 $20 100 $25 production and prices in the nation of justinia in 2016 and 2017 are shown in the table above. which of the following best describes what happened to real gdp and nominal gdp between 2016 and 2017? choose 1 answer: a real gdp increased; nominal gdp has decreased b real gdp has not changed; nominal gdp has not changed c real gdp increased; nominal gdp decreased d real gdp has not changed; nominal gdp increased e real gdp increased; nominal gdp increased

Explanation:

Step1: Calculate 2016 Nominal GDP

Nominal GDP in a year is the sum of (quantity produced in that year × price in that year) for all goods.
For 2016:

• Guitars: \(20\times50 = 1000\)
• Physics books: \(100\times55 = 5500\)
• Sandals: \(100\times20 = 2000\)

Total 2016 Nominal GDP: \(1000 + 5500 + 2000 = 8500\)

Step2: Calculate 2017 Nominal GDP

For 2017:

• Guitars: \(20\times75 = 1500\)
• Physics books: \(100\times60 = 6000\)
• Sandals: \(100\times25 = 2500\)

Total 2017 Nominal GDP: \(1500 + 6000 + 2500 = 10000\)

Step3: Calculate 2017 Real GDP (using 2016 prices)

Real GDP uses base - year (2016) prices and current - year (2017) quantities.

• Guitars: \(20\times50 = 1000\)
• Physics books: \(100\times55 = 5500\)
• Sandals: \(100\times20 = 2000\)

Total 2017 Real GDP: \(1000+5500 + 2000=8500\)

Step4: Analyze the changes

• Real GDP: 2016 Real GDP (which is equal to 2016 Nominal GDP) is 8500, 2017 Real GDP is 8500. So Real GDP has not changed.
• Nominal GDP: 2016 Nominal GDP is 8500, 2017 Nominal GDP is 10000. So Nominal GDP increased.

Answer:

D. Real GDP has not changed; nominal GDP increased