Below are some data from the land of milk and honey.

YEARPRICE OF MILKQUANTITY OF MILKPRICE OF HONEYQUANTITY OF HONEY

2001$1100 Qts.$250 qts.

2002$1200$2100

2003$2200$4100

1. Compute for each year the following below using 2001 as the base year.

a) nominal GDP

b)real GDP,and

c)the GDP deflator for each year, using 2001 as the base year.

2. Why do economists use real GDP rather than nominal GDP to gauge economic well being?