Question

	2015	2015	2018	2018
Product	Quantity	Price	Quantity	Price
Boba Tea	20	$6.00	30	$7.00
Movies	100	$10.00	90	$13
Bikes	3	$1,000.00	6	$1,100.00

Use the information to calculate

(a)Nominal GDP of 2018 and

(b)Real GDP in the year 2018 (Assume 2015 as the base year).

( c ) Can Nominal GDP of 2018 can be higher than Real GDP of 2018 (Explain in few words only)

{Show all the steps (Remember to write all the units)}

Answer 1

Answer
a)
nominal GDP =sum of (current year prices *current year quantity)
NGDP in 2018=30*7+90*13+6*1100
=$7980

b)
RGDP=sum of (base year prices *current year quantity)
RGDP in 2018=6*30+10*90+1000*6
=$7080

c)
Yes,
NGDP is higher than the real GDP because the prices of the product increased over the years and to find and compare the accurate level of GDP RGDP is a good measure as it adjusts for prices.