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 data for two goods across two years and asked for nominal GDP in 2020. Nominal GDP is calculated using current year prices times current year quantities.

Option a: 3500. If we compute 2020 using the prices ($4 for hot dogs and $4 for hamburgers) and the 2020 quantities (250 hot dogs and 500 hamburgers), the total is 250×4 + 500×4 = 1000 + 2000 = 3000, not 3500. Therefore this choice is incorrect.

Option b: 2000. This would require either using only one good’s value or misapplying prices/quantities. If we took only hamburgers or only hot dogs at the wrong quantities, we could reach 2000, but that ignores the full GDP calculation with both goods, so this is incorrect.

Option c: 2500. This would arise if we combined one correct component and one missing or mispriced component (for example, using 250×4 = 1000 for hot dogs and 400 for hamburgers, etc.). However, the correct calculation includes both goods with their respective 2020 prices and quantities, totaling 3000, so this option is incorrect.

Option d: 3000. This matches the proper method: multiply 2020 quantities by 2020 prices and sum across goods: hot dogs: 250×$4 = 1000; hamburgers: 500×$4 = 2000; total = 1000 + 2000 = 3000. Therefore this is the correct value.

In summary, the nominal GDP in 2020 is computed as (250 × 4) + (500 × 4) = 1000 + 2000 = 3000, which corresponds to option d. 3000.

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