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Solved on Jan 18, 2024

Examine the given price and quantity data for TVs and milk in 2015 and 2019. Calculate the nominal and real GDP in 2015 and 2019 using £31,000£ 31,000, £38,125£ 38,125, £32,600£ 32,600.

STEP 1

Assumptions
1. The table provides quantities and prices for two goods (TVs and Milk) for the years 2015 and 2019.
2. 2015 is the base year for calculating real GDP.
3. Nominal GDP is calculated using the prices and quantities of the year in question.
4. Real GDP is calculated using the quantities of the year in question and the prices from the base year.

STEP 2

First, we calculate the nominal GDP for 2015 by multiplying the quantities of goods by their respective prices in 2015.
Nominal GDP2015=(QuantityTVs,2015×PriceTVs,2015)+(QuantityMilk,2015×PriceMilk,2015)Nominal\, GDP_{2015} = (Quantity_{TVs, 2015} \times Price_{TVs, 2015}) + (Quantity_{Milk, 2015} \times Price_{Milk, 2015})

STEP 3

Now, plug in the given values for the quantities and prices of TVs and Milk in 2015 to calculate the nominal GDP for 2015.
Nominal GDP2015=(100×£300)+(500×£2)Nominal\, GDP_{2015} = (100 \times £300) + (500 \times £2)

STEP 4

Calculate the nominal GDP for 2015.
Nominal GDP2015=(100×£300)+(500×£2)=£30,000+£1,000=£31,000Nominal\, GDP_{2015} = (100 \times £300) + (500 \times £2) = £30,000 + £1,000 = £31,000

STEP 5

Since 2015 is the base year, the real GDP for 2015 is the same as the nominal GDP for 2015.
Real GDP2015=Nominal GDP2015=£31,000Real\, GDP_{2015} = Nominal\, GDP_{2015} = £31,000

STEP 6

Next, we calculate the nominal GDP for 2019 by multiplying the quantities of goods by their respective prices in 2019.
Nominal GDP2019=(QuantityTVs,2019×PriceTVs,2019)+(QuantityMilk,2019×PriceMilk,2019)Nominal\, GDP_{2019} = (Quantity_{TVs, 2019} \times Price_{TVs, 2019}) + (Quantity_{Milk, 2019} \times Price_{Milk, 2019})

STEP 7

Now, plug in the given values for the quantities and prices of TVs and Milk in 2019 to calculate the nominal GDP for 2019.
Nominal GDP2019=(105×£350)+(550×£2.50)Nominal\, GDP_{2019} = (105 \times £350) + (550 \times £2.50)

STEP 8

Calculate the nominal GDP for 2019.
Nominal GDP2019=(105×£350)+(550×£2.50)=£36,750+£1,375=£38,125Nominal\, GDP_{2019} = (105 \times £350) + (550 \times £2.50) = £36,750 + £1,375 = £38,125

STEP 9

To calculate the real GDP for 2019, we use the quantities of 2019 but the prices from the base year (2015).
Real GDP2019=(QuantityTVs,2019×PriceTVs,2015)+(QuantityMilk,2019×PriceMilk,2015)Real\, GDP_{2019} = (Quantity_{TVs, 2019} \times Price_{TVs, 2015}) + (Quantity_{Milk, 2019} \times Price_{Milk, 2015})

STEP 10

Now, plug in the given values for the quantities of 2019 and the prices from 2015 to calculate the real GDP for 2019.
Real GDP2019=(105×£300)+(550×£2)Real\, GDP_{2019} = (105 \times £300) + (550 \times £2)

STEP 11

Calculate the real GDP for 2019.
Real GDP2019=(105×£300)+(550×£2)=£31,500+£1,100=£32,600Real\, GDP_{2019} = (105 \times £300) + (550 \times £2) = £31,500 + £1,100 = £32,600
The nominal GDP in 2015 is £31,000; the real GDP in 2015 is £31,000; the nominal GDP in 2019 is £38,125; and the real GDP in 2019 is £32,600.
The correct answer is: £31,000;£31,000;£38,125;£32,600£ 31,000 ; £ 31,000 ; £ 38,125 ; £ 32,600

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