Nominal GDP = Sum of price of a good in the current year * Quantity of good in the current year
Real GDP = Sum of price of a good in the base year * quantity if good in the current year
Growth rate = (GDP2-GDP1)/GDP1 * 100
a.
Let price of books be P
As 2015 is base year, Given Real GDP in 2015 = 15000
Nominal GDP in 2015 = Real GDP of 2015 = 60*200 + 800 *P = 15000
P = (15000 - 12000) / 800 = 3.75
b.
Growth rate of Nominal GDP = 15%
Nominal GDP in 2016 = 15000 * 0.15 + 15000 = 17250
Let Books produced be B in 2016
Nominal GDP in 2016 = 70 *120 + B * 8 = 8400+B *8 = 17250
B = (17250 - 8400)/ 8 = 1106.25 = 1106 (Nearest Whole number)
c.
Real GDP in 2016 = 70 * 200 + 1106*3.75 = 18147.50
Growth rate in Real GDP = (18147.50 - 15000) / 15000 * 100 = 20.98% = 21.0%
Suppose that the British economy produces two goods: laptops and books. The quantity produced and the...
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