Consider an economy that produces only
chocolate bars. In year 1, the quantity produced
is 3 bars and the price is $4. In year 2, the
quantity produced is 4 bars and the price is $5.
In year 3, the quantity produced is 5 bars and
the price is $6. Year 1 is the base year.
a. What is nominal GDP for each of these three
years?
b. What is real GDP for each of these years?
c. What is the GDP deflator for each of these years?
d. What is the percentage growth rate of real
GDP from year 2 to year 3?
e. What is the inflation rate as measured by the
GDP deflator from year 2 to year 3?
f. In this one-good economy, how might you
have answered parts (d) and (e) without first
answering parts (b) and (c)?