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 2010

Question

BlackTom AI · Accepted Answer

First, restating the data clearly helps orient the calculation. We are told to compute nominal GDP in 2010, which is the sum of current-year prices times current-year quantities for all goods.

Option a: 1200. To check this, multiply the 2010 prices by 2010 quantities: hot dogs: 2 dollars × 200 = 400; hamburgers: 3 dollars × 200 = 600. Sum = 400 + 600 = 1000. Therefore, 1200 is too large and does not match the data for 2010.

Option b: 1100. As shown above, the exact 2010 calculation yields 1000. An amount of 1100 would require either mis-summing one of the components or using incorrect prices or quantities, which is not supported by the given numbers. Hence this is incorrect.

Option c: 1000. Here is the direct calculation: hot dogs contribute 2 × 200 = 400, hamburgers contribute 3 × 200 = 600, and the total nominal GDP in 2010 is 400 + 600 = 1000. This aligns precisely with the provided 2010 data.

Option d: 900. This value would imply a total that is 100 less than the 1000 computed from the actual data. It could result from omitting one good’s value or using an incorrect quantity or price, but with the given table the correct breakdown sums to 1000, not 900.

In summary, the nominal GDP for 2010 is computed by summing (price2010 × quantity2010) across goods, giving 400 from hot dogs and 600 from hamburgers, for a total of 1000. Each incorrect option misstates one or both components or misaggregates the totals, leading to a mismatch with the data given for 2010.

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