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Homework answers / question archive / Assume an economy in which only broccoli and cauliflower are produced

Assume an economy in which only broccoli and cauliflower are produced

Accounting

Assume an economy in which only broccoli and cauliflower are produced. In year 1, 600 million kilograms of broccoli are produced and consumed and its price is $0.90 per kilogram, while 750 million kilograms of cauliflower are produced and consumed and its price is $0.70 per kilogram. In year 2, 800 million kilograms of broccoli are produced and consumed and its price is $0.95 per kilogram, while 650 million kilograms of cauliflower are produced and its price is $0.80 per kilogram.

 Using year 1 as the base year, the GDP price deflator in year 1 is and the GDP price deflator in (Round your responses to two decimal places as needed.) year 2 is

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Answer:

GDP price deflator in year 1 : 100

GDP price deflator in year 2 :108.94

Explanation :

GDP deflator =(nominal GDP /real GDP) *100

Nominal GDP =current year quantity *current year price

Year 1 =(600million* $0.90)+(750 million*$0.70)

=540 million+525 million

= 1065 millions.

Year 2=(800 million *0.95)+(650 million*0.80)

=760+520

=1280.

Real gdp =current year quantity* base year prices

Year 1 =(600million* $0.90)+(750 million*$0.70)

=540 million+525 million

= 1065 millions.

Year 2 =(800million* $0.90)+(650 million*$0.70)

=720+455

= 1175 millions.

GDP deflator = (nominal GDP /real GDP) *100

Year 1 =(1065/1065)*100

=100

Year 2 =(1280/1175)*100

=108.94

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