Assume there are only two goods in the economy, french fries and onion rings. In 2011, 1,000,000 servings of french fries were sold at $0.40 each and 800,000 servings of onion rings at $0.60 each. From 2011 to 2012, the price of french fries rose by 25% and the servings sold fell by 10%; the price of onion rings fell by 15% and the servings sold rose by 5%.

a. Calculate nominal GDP in 2011 and 2012. Calculate real GDP in 2012 using 2011 prices.

b. Why would an assessment of growth using nominal GDP be misguided?