The economy of Utopia produces three goods: Computers, DVDs, and Pizzas

The economy of Utopia produces three goods: Computers, DVDs, and Pizzas. The table below shows the prices and output of the three goods for the years 2014, 2015, and 2016.

  Computers DVDs Pizzas

Year Price Quantity Price Quantity Price Quantity

2014 $900 10 $10  100  $15  2

2015 $1,000 10.5 $12  105  $16  2

2016 $1,050 12 $14  110  $17  3

a. Calculate the nominal GDP for Utopia for each of the three years.

b. What is the percentage change in nominal GDP from 2015 to 2016.

c. Calculate the real GDP for Utopia using 2014 prices (2014=base year) for each of the three years.

d. What is the percentage change in real GDP from 2015 to 2016.

e. Discuss why economists consider real GDP a more accurate measure of growth in the economy?

-You should construct a table like the one below and fill in the blanks to answer the questions.

Year  Nominal GDP Growth rate Real GDP Growth rate

2014 —— N/A ——- N/A

2015 —— —— ——- ——-

2016 —— —— ——- ——-

Here’s the SOLUTION

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