We are studying an economy that produces and consumes two goods: hot dogs and hamburgers. The table below shows data for years 2010 and 2020. [table]
| Year 2010 | Year 2020 Price of a hot dog | $2 | $4 Price of a hamburger | $3 | $4 Quantity of hot dogs | 200 | 250 Quantity of hamburgers | 200 | 500
[/table] Calculate nominal GDP 2020

Question

BlackTom AI · Accepted Answer

We are given the data for 2020: price of a hot dog = $4, price of a hamburger = $4, quantity of hot dogs = 250, quantity of hamburgers = 500.
To find nominal GDP in 2020, multiply each good's current price by its current quantity, then sum:
- Hot dogs: 250 × $4 = $1,000
- Hamburgers: 500 × $4 = $2,000
Add them together: $1,000 + $2,000 = $3,000.
Now evaluate the options:
Option a: 2000. This would require a smaller total than calculated; it might correspond to 250 × 4 = 1000 plus 0 for hamburgers, or some other mismatched pairing, but it does not match the total of both goods.
Option b: 3000. This matches the computed sum of current prices times current quantities for both goods, i.e., $1,000 for hot dogs plus $2,000 for hamburgers.
Option c: 3500. This is higher than the computed total; it implies either higher quantities or prices than given, or double-counting one of the components.
Option d: 2500. This is also inconsistent with the data; it would require a smaller contribution from one or both goods than is present.
The correct approach is to use the provided 2020 values (current prices and current quantities) and add the two products together to obtain the nominal GDP for 2020.

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