Assume there are only two goods in the economy, french fries and onion rings. In 2009

Chapter 0, Problem 1

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Assume there are only two goods in the economy, french fries and onion rings. In 2009, 1,000,000 servings of french fries were sold for $0.40 each and 800,000 servings of onion rings were sold for $0.60 each. From 2009 to 2010, the price of french fries rose to $0.50 and the servings sold fell to 900,000; the price of onion rings fell to $0.51 and the servings sold rose to 840,000. a. Calculate nominal GDP in 2009 and 2010. Calculate real GDP in 2010 using 2009 prices. b. Why would an assessment of growth using nominal GDP be misguided?

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