ANSWERS TO QUESTIONS

2001 $1 100 $2 150. 2002 $2 150 $3 200. Y 01 = ($1 * 100) + ($2 * 150) = $100 + $300 = $400. Y 02 = ($2 * 150) + ($3 * 200) = $300 + $600 = $900. The total value has increased but some of the increase in nominal GDP is due to higher prices. Alternatively we calculate real GDP and hold prices constant equaling their value in some base year. ................
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