y! irsc edu - Yahoo Search Results x O Indian River State College - Prod X Bb Announcements - ECO2013-202 x + 7 X + -> C Airsc.blackboard.com/webapps/blackboard/execute/announcement?method=search&context=mybb&course_id=_105068_1&viewChoice=2 D Homework 2: Chapters 26-27 Name: Class: Date This assignment relates to following learning outcomes: o calculate nominal GDP, real GDP, and GDP price index o describe how expenditures on goods and services can be summed to determine GDP o describe the difference between nominal GDP and real GDP Follow the instructions below to complete the assignment. Instructions: Once you've watched the video: Gross Domestic Product - The Economic Lowdown Video Series, Episode 7, reviewed websites: The Bureau of Labor Statistics of the U.S. Department of Labor (BLS) and The U.S. Census Bureau, and read Chapter 26: An Introduction to Macroeconomics; Chapter 27: Measuring Domestic Output and National Income then read following problem(s) and find the solution(s). . Suppose that annual output in year 1 in a 3-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. 1.1. If the prices in both years are $4 per quart for ice cream, $3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy's nominal GDP in year 1? Show the calculation. Recall that GDP is the core measure of an economy's health. Nominal GDP (also known as current-dollar economic statistics) is not adjusted to account for any price changes. To calculate nominal GDP (the value of all final goods and services evaluated at current-year prices) you have to use the formula: Nominal GDP= P*Q. To get a real picture of a nation's economic growth economists prefer using real GDP. To calculate real GDP (the value of all final goods and services evaluated at base-year prices for each year) you have to use the formula: Real GDP= P*Q. In this case, you have to follow a several steps. The first step is to find the value of each good consumed. The second step is to add up the nominal value for the goods for each year separately. Place your answer here. 1.2. What was its nominal GDP in year 2? Show the calculation. Place your answer here. 2. Now, assume that in year 3, the output mix changes again to 3 quarts of ice cream, 1 bottles of shampoo, and 3 jars of peanut butter. Consider the year 1 as the base year. 2.1. If the prices in year 3 are $5 per quart for ice cream, $4 per bottle of shampoo, and $3 per jar of peanut butter, what is the economy's real GDP in year3? Place your answer here
