I P=$10 year one P=Price/Q=Quantity/TR=Total Revenue Q=15,000/wk TR=$150,000/wk=$7,800,000/yr II Scenario 1 P=$15 Year Two Q=15,000/wk TR=$225,000/wk=$11,700,000/yr To find nominal take difference, and divide it by the original III Scenario two P=$10 Q=20,000/wk TR $200,000/wk=$10,000,000/yr IV Scenario three P=$15 Q=20,000/wk TR=$300,000/wk=$15,600,000/yr Nominal GDP in 2000 is defined as the value of output produced in 2000 using the prices of output in 2000. Real GDP is defined as the value of output produced in 2000 using the prices of output that existed in a base year. Currently, the U.S. uses 1996 as its base year. Real GDP measures the quiantity of goods and services produced in a given year after eliminating the influence of inflation, which is reflected in nominal GDP. Nominal GDP equals the value of output in a given year at current prices. Current prices are prices at which goods sell in the year they are produced. Therefore, nominal GDP in 2001 for Athlete is calculated by multiplying the output produced in 2001 by the prices in 2001. Real GDP is the value of production of goods and services using the prices from a base year. Therefore, real GDP in 2001 is calculated using the output from 2001 and prices from the base year, which is 2001 in this case The Growth Rate in real GDP is defined as the percentage change in real GDP. From 1997 to 1998, real GDP increased from $8,160 billion to $8,509 billion. Growth rate in Real GDP= ($8,509 billion - $8,169 billion) / $8,160 billion Growth rate in Real GDP= $349 billion / $8,160 billion Growth Rate in Real GDP= .042769 = 4.3% Nominal GDP is the value of output using current prices. Real GDP is the value of output using a base year?s prices. Therefore, nominal GDP can go up either because prices are rising or because output is increasing. On the other hand, real GDP can go up only if output increases. In this case, because Real GDP is falling, output must have declined. But because nominal GDP went up, prices must have increased. This helps illustrate why economists believe that Real GDP is a better measure of economic activity. If prices rise enough, nominal GDP can go up, even as fewer goods and services are produced.
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