Consider an economy that produces only chocolatebars. In year 1, the quantity produced is 3 barsand the price is $4 per bar. In year 2, the quantityproduced is 4 bars and the price is $5 per bar.In year 3, the quantity produced is 5 bars and theprice is $6 per bar. Year 1 is the base year.a. What is nominal GDP for each of these three years?b. What is real GDP for each of these years?c. What is the GDP deflator for each of these years?d. What is the percentage growth rate of real GDPfrom year 2 to year 3?e. What is the inflation rate as measured by the GDPdeflator from year 2 to year 3?f. In this one-good economy, how might you haveanswered parts (d) and (e) without first answeringparts (b) and (c)?

Question

Consider an economy that produces only chocolate
bars. In year 1, the quantity produced is 3 bars
and the price is $4 per bar. In year 2, the quantity
produced is 4 bars and the price is $5 per bar.
In year 3, the quantity produced is 5 bars and the
price is $6 per bar. Year 1 is the base year.
a. What is nominal GDP for each of these three years?
b. What is real GDP for each of these years?
c. What is the GDP deflator for each of these years?
d. What is the percentage growth rate of real GDP
from year 2 to year 3?
e. What is the inflation rate as measured by the GDP
deflator from year 2 to year 3?
f. In this one-good economy, how might you have
answered parts (d) and (e) without first answering
parts (b) and (c)?

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