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1. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and catsup in 2010. Assume one half of the tomatoes are used in making the catsup and the other half of tomatoes are purchased by households.
Product
Quantity
Price ($) Shoes 40
quantity shoes 50
price DVDs 100
quantity dvds 25
price Tomatoes 2000
quantity tomatoes 1
price Catsup 300
quantity catsup 5
a. What is the nominal GDP in 2010 for this simple economy?
b. In 2011, suppose that the whole tomatoes products were used in making the catsup and at the same time the price of shoes, DVDs, Tomatoes, Catsup increased three-fold each and their respective quantities also increased twice. Calculate Real GDP, GDP deflator and rate of inflation in 2011.
Using the hypothetical economy data in the table below, please answer the questions below. Please show the equations and work so that I can better understand how the answer is arrived at.
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