1. Suppose the economy produces 2 goods: shovels and boots. In the first quarter of 2020 (the

base period), 6500 shovels were produced at a value of $30 per shovel, while 9000 pairs of

boots were produced at a value of $60 per pair. Meanwhile, in the first quarter of 2021,

7000 shovels were produced at a value of $35 per shovel, while 9500 pairs of boots were

produced at a value of $70 per pair.

1. Solve for the nominal and real GDP in both the first quarter of 2020 and the first quarter of 2021.
2. Solve for the growth rate of real GDP between the first quarter of 2020 and the first quarter of 2021. What does this growth rate indicate, or mean? In other words, what does the increase in real GDP indicate?
3. Solve for the GDP price index in the first quarter of 2020 and in the first quarter of 2021.