Suppose firms in Utopia produce only ice cream and chocolate candies. Consider Utopia's production information presented in the table below. Ice creamChocolate Candies   YearQuantity Produced (gallons)Price per gallonQuantity Produced (boxes)Price per candy box20146,000,000$1014,000,000$420157,000,000$8.7516,000,000$4.7520168,500,000$820,000,000$5.5Nominal GDP of Utopia was the highest in __? The real GDP of Utopia in 2016 is higher if ___ is the base year than if ____ is the base year.

Question
Asked Sep 27, 2019

Suppose firms in Utopia produce only ice cream and chocolate candies. Consider Utopia's production information presented in the table below.

 
Ice cream
Chocolate Candies     
Year
Quantity Produced (gallons)
Price per gallon
Quantity Produced (boxes)
Price per candy box
2014
6,000,000
$10
14,000,000
$4
2015
7,000,000
$8.75
16,000,000
$4.75
2016
8,500,000
$8
20,000,000
$5.5

Nominal GDP of Utopia was the highest in __? 

The real GDP of Utopia in 2016 is higher if ___ is the base year than if ____ is the base year.

check_circleExpert Solution
Step 1

The market value of goods and services is the Nominal GDP. The inflation adjusted nominal GDP is the Real GDP.

Step 2

Nominal GDP of Utopia is highest in 2016. Calculation is shown below.

Nominal GDP2016
=(QuantityIce cream XPricejce cream/
+QuantityChocolate candies x Price Chocolate candies
(8,500,000x8+20,000,000x 5.5)
=
= (68,000,000+110,000,000)
- 178,000,000
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Nominal GDP2016 =(QuantityIce cream XPricejce cream/ +QuantityChocolate candies x Price Chocolate candies (8,500,000x8+20,000,000x 5.5) = = (68,000,000+110,000,000) - 178,000,000

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Step 3

Real GDP 2016 with base year 2014...

Real GDP 2016 with base year 2014 =Quantity Ice cream 2016 XPriceIce cream 2014)
QuantityChocolate 2016 XPrice Chocolate 2014
(8,500,000x10)+(20,000,000x 4)
85,000,000+80,000,000
-165,000,000
help_outline

Image Transcriptionclose

Real GDP 2016 with base year 2014 =Quantity Ice cream 2016 XPriceIce cream 2014) QuantityChocolate 2016 XPrice Chocolate 2014 (8,500,000x10)+(20,000,000x 4) 85,000,000+80,000,000 -165,000,000

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