Assume an economy that produces only the following 3 goods:

Year 1 Year 2

Price Quantity Price Quantity

Beer $6 50 $8 60

Pretzels $5 60 $4 50

Cheese $2 80 $4 90

5 points possible for each problem

Nominal GDP

1. Calculate Nominal GDP in year 1
2. Calculate Nominal GDP in year 2

Real GDP with base year prices as weights

1. Assume year 1 is the base year (i.e., nominal GDP in year 1 = real GDP in year 1). Using year 1's prices, what is real GDP in year 2?
2. From your answer to 3, what was the growth rate of real GDP in year 2?
3. Assume year 2 is the base year (i.e., nominal GDP in year 2 = real GDP in year 2). Using year 2's prices, what is real GDP in year 1?
4. From your answer to 5, what was the growth rate of real GDP in year 2?

Real GDP using the chain-weighted method

1. Using the chain-weighted method, what is the growth rate of real GDP in year 2?
2. What is Real GDP in Year 2 if Year 1 is the base year? (i.e., nominal GDP in year 1 = real GDP in year 1)
3. What is Real GDP in Year 1 if Year 2 is the base year? (i.e., nominal GDP in year 2 = real GDP in year 2)