Assume there are only two goods in the economy, french fries and onion rings. In 2013, 1,000,000 servings of french fries were sold for $0.40 each and 800,000 servings of onion rings were sold for $0.60 each. From 2013 to 2014, the price of french fries rose to $0.50 and the servings sold fell to 900,000; the price of onion rings fell to $0.51 and the servings sold rose to 840,000.
Calculate nominal GDP in 2013 and 2014. Calculate real GDP in 2014 using 2013 prices.
Why would an assessment of growth using nominal GDP be misguided?
Indicate the effect of each of the following on real GDP:
Chevrolet increases its production of Corvettes.
Consumer expenditures increase as a result of inflation.
$50 billion is spent on hurricane cleanup.
Citizens spend 10,000 hours as neighborhood watch volunteers.