Assignment 1

1. Suppose that a simple economy produces only the following four goods and
services: textbooks, hamburgers, shirts and cotton. Assume that all the cotton is used
in the production of shirts. Use the information in the following table to calculate
nominal GDP FOR 2009.

PRODUCTION AND PRICE STATISTICS FOR 2009

PRODUCT QUANTITY PRICE IN US$
Books 100 * 60
Hamburgers 80 2
Shirts 40 25 ↑
Cotton 30 10

Nominal GDP=Q current-Year X P current-year

04 09 04
(100x60)+(80x2)+(40x25)
nominal GDP=7,160
04

2. Suppose that an economy produces only baseballs and footballs. The prices and
quantities of these goods for years 2000 and 2011 are given below.

Year Baseballs Footballs

P Q P Q
2000 $4.00 75 $3.00 45
2011 $8.00 100 $6.00 65 ->
 - Calculate nominal GDP and real GDP assuming that the year 2000 is the
base year.

Nominal GDP=Q current-Year X P current-year

201 3517 2011

For the year 2011

2017 2511

(100x8.00)+(65x6.00)
Nominal GDP=1,190 >x)

Real GDP=Q current-Year X P base-year

281 2011 1000

For the year 2011

201 1000 2011 2000

(100x4.00)+(65x3.00)
Real GDP=595 2011

2000
200 2000

Nominal GDP=Q current-Year X P current-year

For the year 2000
2000 2000

(75x4.00)+(45x3.00)
Nominal GDP=435 2000