[Zebadiyah]

Q: Consider an economy that produces only three goods. The data of quantity produced and price of all three commodities for three years is given as follows:

Goods/year 2006 2007 2008
P Q P Q P Q

Wheat 10 400 11 450 12 500

Rice 7 200 6 250 8 300

Oranges 4 100 5 150 6 200

a) Find the nominal GDP of all three years
b) Find the growth rate of nominal GDP
c) Find the real GDP of year 2007 and 2008 by considering 2006 as base year
d) Find the growth rate of Real GDP

Solution:
a) To calculate the nominal GDP of each year :

2006 2007 2008
P x Q P x Q P x Q
10x400 = 4000 11 x 450 = 4950 12 x 500 = 6000
7x200 = 1400 6 x 250 = 1500 8 x 300 = 2400
4x100 = 400 5 x 150 = 750 6 x 200 = 1200
Total = 5800 Total = 7200 Total = 9600

Could you please tell me if this solution is correct.

b) Could you please guide me how to calculate the growth rate of nominal GDP

c) To calculate the real GDP : we would use the formula [(current year- base year)/ base year]x100

d) I am guessing to solve this part we'll take the price of 2006 since it is the base year and multiply it with the Q of 2007 and 2008 respectively to get the growth rate of Real GDP.

Please Guide me : )