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since 2007, Country A has been producing only computer chips
since 2007, Country A has been producing only computer chips. the nominal GDP was $189billion in 2007, and its total output was 45billion. if 2007 is the base price year, what will be the:
a) the base price
b) Real GDP for the year 2007
c ) the real GDP for the year 2008, when the total output of the country increase by 20%
i need a step by step calculations of all the 3 questions please
Expert Solution
a) Computation of Base Price:
Base price = Nominal GDP /Output
= $189 billion/$45 billion
= $4.2 billion
b) Computation of Real GDP for 2007:
Real GDP for 2007 = $189 billion.
Real GDP and nominal GDP for base year is always equal because in base year price level is 100.
c) Computation of Real GDP in 2008:
Increase in output = 20*45/100 = 900/100 = 9 billion
Total output in 2008 = 45+6 = 54 billion
Real GDP in 2008 = Output in 2008 * Price of Base Year = 54* 4.2 = $226.8 billion
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