# Calculating nominal GDP, real GDP and GDP deflator

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Nowhereistan is a poor country in an island in the middle of nowhere. It produces only apples, bananas and oranges. The following are the data for 2009 (base year) and 2010

Fruit Quantity 2009 Price 2009 Quantity 2010 Price 2010

Apples 3000 bags $2 per bag 4000 bags $3 per bag

Bananas 6000 bunches $3 Per Bunch 14000 bunches $2 per bunch

Oranges 8000 bags $4 per bag 32000 bags $5 per bag

a) Find the nominal GDP in both years? What is the growth in nominal GDP?

b) Find the real GDP in both years? What is the growth of the real GDP?

c) Find the GDP deflator for both years? What is the percentage change in price level?

d) Is the growth in nominal GDP more because of the change in prices or because of a real growth in output of the country?

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Solution describes the steps to calculate nominal GDP, real GDP and GDP deflator for base year and 2010.

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a) Find the nominal GDP in both years? What is the growth in nominal GDP?

Nominal GDP in 2009=Value of its goods and services produced at 2009 prices

=3000*2+6000*3+8000*4=$56000

Nominal GDP in 2010=Value of its goods and services produced at 2010 prices =4000*3+14000*2+32000*5=$200000

Growth in Nominal GDP=(Nominal GDP in 2010-Nominal ...

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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India

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