Question

In the Land of Milk and Honey, they produce two goods: Milk and Honey. In 2014, milk cost $2 a gallon and they produced 20 gallons. Honey cost $1 a pint and they produced 40 pints. In 2015, milk cost $2 a gallon and they produced 24 gallons. Honey cost $1 a pint and they produced 48 pints. In 2016, milk cost $ 2.50 a gallon and they produced 24 gallons. Honey cost $1.25 a pint and they produced 48 pints. The base year is 2015.

1. During which time period did standard of living improve more? From 2014 to 2015 or from 2015 to 2016?
2. Calculate real GDP in 2014
3. Calculate nominal GDP in 2015
4. Calculate the GDP deflator in 2016
5. Calculate the rate of inflator from 2015 to 2016. Express your answer as a percentage.
6. Give a scenario in which nominal GDP increase but real GDP stays the same
7. Give a scenario in which real per capita GDP decreases but real GDP increases.
8. Give a scenario in which real per capita GDP increases but quality of life decreases