Table 23-5

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown in the following table. The base year is 2017.

Year Movies Popcorn

Price

(Dollars per movie)

Quantity

(Movies)

Price

(Dollars per bag)

Quantity

(Bags)

2016 10.00 500 5 1,000
2017 11.00 600 4 900
2018 12.00 650 5 950
2019 12.00 625 6 925

Refer to Table 23-5. What was this country's nominal GDP in 2016?

Question

Table 23-5

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown in the following table. The base year is 2017.

​

Year	Movies	Popcorn

Price

(Dollars per movie)

Quantity

(Movies)

Price

(Dollars per bag)

Quantity

(Bags)

2016	10.00	500	5	1,000
2017	11.00	600	4	900
2018	12.00	650	5	950
2019	12.00	625	6	925

​

Refer to Table 23-5. What was this country's nominal GDP in 2016?

BlackTom AI · Accepted Answer

Nominal GDP equals the market value of all final goods and services produced in a given year, calculated using that year’s current prices. For a two-good economy, nominal GDP = (price of movies × quantity of movies) + (price of popcorn × quantity of popcorn) for the year in question.

Relevant concepts:
- Nominal GDP uses current-year prices and current-year quantities.
- Real GDP would use base-year prices; here the base year (2017) is irrelevant for nominal GDP in 2016.
- Avoid mixing prices from different years when computing nominal GDP.

Step-by-step calculation for 2016 (showing all intermediate steps):
1. Value of movies in 2016 = price per movie in 2016 × quantity of movies in 2016.
   = $10.00 × 500
   = $5,000.00
2. Value of popcorn in 2016 = price per bag in 2016 × quantity of bags in 2016.
   = $5.00 × 1,000
   = $5,000.00
3. Nominal GDP in 2016 = value of movies + value of popcorn.
   = $5,000.00 + $5,000.00
   = $10,000.00

Why this answer is correct:
- The computation uses the 2016 prices and 2016 quantities, which is exactly how nominal GDP is defined. Both goods’ contributions sum to $10,000, so the country’s nominal GDP in 2016 is $10,000.

Why other possible mistakes would be incorrect:
- Using 2017 (base-year) prices would calculate real GDP for 2016, not nominal GDP.
- Using only one good or misreading quantities/prices would understate or overstate GDP.
- Adding quantities instead of values would be meaningless (mixing units).

Conclusion: The nominal GDP for Lahland in 2016 is $10,000, which matches the provided correct answer.

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