Suppose that the economy of X is based on two goods, smoked meat and hotel stays. Smoked meat is measured in kilograms, and hotel stays are measured in nights (e.g. if a family of four stays in a hotel room for two nights that equals eight nights of hotel stays). The prices and quantities in 2015 and 2016 are provided in the table below. Good 2015 price (dollars) 2015 quantity 2016 price (dollars) 2016 quantity Smoked meat (kg) 4 200,000 4 200,000 Hotel stays (nights) 100 2,000 200 5,000

(a) In general, what is the difference between nominal and real Gross Domestic Product?

b)Using the above information, if the base year is 2015, what are the values of nominal GDP and real GDP in 2016?

c) Find the growth rate of nominal and real GDP from 2015 to 2016.

d) Given the values in b) what is the rate of inflation from 2015 to 2016? Using 2015 output to represent the basket of goods, find the growth rate of the CPI between 2015 and 2016

e) What are some of the limitations of using GDP (or GDP per capita) as a measure of standard of living?