Question
Asked Oct 21, 2019

1. Calculate the inflation rate.

2. Re-do parts b)-d), but use year 2 as the base year. How do your answers differ?

 

Price of Basketballs Quantity of Basketballs
Price of Footballs
Quantity of Footballs
Year
Year 1
10
120
12
200
Year 2
12
200
15
300
180
Year 3
14
18
275
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Price of Basketballs Quantity of Basketballs Price of Footballs Quantity of Footballs Year Year 1 10 120 12 200 Year 2 12 200 15 300 180 Year 3 14 18 275

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Expert Answer

Step 1

Hi there! Thankyou for the question. As per the honor code, we are authorized to do one question at a time.

GDP (Gross Domestic Product): It refers to the total of market value of all produced final goods and services during a specific period.

Step 2

The table showing production in year 1, 2 and 3 is as follows:

Quantity of Footballs Price of Basketballs
Price of Footballs
Quantity of Basketballs
Year
120
Year 1
10
12
200
Year 2
12
200
15
300
275
Year 3
14
180
18
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Quantity of Footballs Price of Basketballs Price of Footballs Quantity of Basketballs Year 120 Year 1 10 12 200 Year 2 12 200 15 300 275 Year 3 14 180 18

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Step 3

The Nominal GDP in year 1, 2 and 3...

Nominal GDP
Year 1-120x10+12x200
$3600
Year 2=12x200+15 x300|
=S6900
Year 3=14x180+18x275
$7470
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Nominal GDP Year 1-120x10+12x200 $3600 Year 2=12x200+15 x300| =S6900 Year 3=14x180+18x275 $7470

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