a) 2016:
Nominal GDP: $1 x 100 quarts + $2 x 50 quarts = 200$
Real GDP: $1 x 100 quarts + $2 x 50 quarts = 200$
GDP deflator: (Nomial GDP/Real GDP) x 100 = 200/200 x 100 = 100%
2017
Nominal GDP: $1 x 200 quarts + $2 x 100 quarts = 400$
Real GDP: $1 x 200 quarts + $2 x 100 quarts = 400$
GDP deflator: 400/400 x 100 = 100%
2018
Nominal GDP: $2 x 200 quarts + $4 x 100 quarts = 800$
Real GDP: $1 x 200 quarts + $2 x 100 quarts = 400$
GDP deflator: 800/400 x 100 = 200%
b) Nominal GD:
- Percentage change in 2016 and 2017: (400-200)/200 x 100 = 100% (price in each good didn’t
change)
- Percentage change in 2017 and 2018: (800-400)/400 x 100 = 100% (quantity in each good didn’t
change)
Real GDP:
- Percentage change in 2016 and 2017: (400-200)/200 x 100 = 100% (price in each good didn’t
change)
- Percentage change in 2017 and 2018: (400-400)/400 x 100 = 0% (quantity in each good didn’t
change)
Percentage change in GDP deflator 2017 and 2018: (200-100)/100 = 1%
c) Economic well-being didn’t increase more in 2017 and 2018