Question

suppose the information in the following table is for a simple economy that produces only the following four goods: shoes, hamburgers, shirts, and cotton. further, assume that all of the cotton is used to produce shirts.

2017 statistics 2025 statistics 2026 statistics
product quantity price quantity price quantity price
shoes 110 $55.00 120 $70.00 120 $75.00
hamburgers 80 2.50 110 2.50 125 2.75
shirts 70 40.00 60 35.00 85 35.00
cotton 11,000 0.09 10,000 0.08 11,000 0.07
a. if the base year is the year 2017, then real gdp for 2025 equals $ 9275.00 (round your answer to the nearest penny) and the real gdp for 2026 equals $ (round your answer to the nearest penny).

Explanation:

Step1: Calculate real GDP for 2026

Real GDP is calculated using base - year prices. The formula for real GDP is \(\text{Real GDP}=\sum(\text{Quantity in current year}\times\text{Price in base year})\)

For shoes: Quantity in 2026 is \(Q_{shoes}=120\), price in base year (2017) is \(P_{shoes}^{2017}=\$55\). So the value of shoes in real - GDP calculation is \(120\times55 = 6600\)

For hamburgers: Quantity in 2026 is \(Q_{hamburgers}=125\), price in base year (2017) is \(P_{hamburgers}^{2017}=\$2.50\). So the value of hamburgers in real - GDP calculation is \(125\times2.50=312.5\)

For shirts: Quantity in 2026 is \(Q_{shirts}=85\), price in base year (2017) is \(P_{shirts}^{2017}=\$40\). So the value of shirts in real - GDP calculation is \(85\times40 = 3400\)

For cotton: Since all cotton is used to produce shirts (intermediate good), it is not included in GDP calculation.

Step2: Sum up the values

\(\text{Real GDP}_{2026}=6600 + 312.5+3400\)

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Answer:

\(10312.50\)