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nguyenduong67 nguyenduong67
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5 years ago
Imagine that an economy produces two goods, flashlights and fishing lures. In 2011, the economy produced 100 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $5 and $11, respectively. In 2012, the economy produced 120 flashlights and 60 fishing lures, and the prices of flashlights and fishing lures were $7 and $14, respectively. respectively. What happened to nominal GDP from 2011 to 2012? What happened to real GDP?
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Survey of Economics: Principles, Applications and Tools


Edition: 6th
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Quinn1981Quinn1981
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5 years ago
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Nominal GDP in 2011 was (100 × 5) + (50 × 11) = $1,050. In 2012 nominal GDP was (120 × 7) + (60 × 14) = $1,680. For real GDP, we calculate GDP for 2012 in 2011 dollars. 2012 GDP in 2011 dollars would be (120 × 5) + (60 × 11) = $1,260. So while nominal GDP increased by 60%, real GDP only increased by 20%.
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