Suppose the following table records the total output and prices for an entire economy. Further, suppose the base year in the following table is 2003. The base year is the year for comparing other years. Calculating GDP for 2004 is (P₂₀₀₄ x Q₂₀₀₄= nominal or current GDP) and (P₂₀₀₃ x Q₂₀₀₄ = real or constant GDP)

a. What is the value of nominal GDP in 2003?

($1.00)*(200) + ($10.00)*(50) = $700

b. What is the real GDP in 2003?

($1.00)*(200) + ($10.00)*(50) = $700

c. What is the value of nominal GDP in 2004?

($1.00)*(220) + ($11.00)*(50)  =  $770

d. What is the value of real GDP in 2004?

($1.00)*(220) + ($10.00)*(50) = $720

e. What is the percent change in nominal GDP from 2003 to 2004?

($770 - $700) / $700 * 100% = 10%

f. What is the percent change in real GDP from 2003 to 2004?

($720 - $700) / $700 = 2.86%

g. What was nominal GDP last year? (The real world GDP not the pretend one above,)

$13.2 trillion

h. Is GDP a good measure of welfare?

Yes, but it has problems and you should discuss some of them in your answer.