# What combined contribution does domestic production make to nominal GDP? – unicorp essays

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Question 5. Suppose domestically grown apples cost consumers $1.20 per pound and domestically grown oranges cost consumers $3 per pound. What combined contribution does domestic production of 1,000 pounds of apples and 2,000 pounds of oranges make to nominal GDP? A.$5.400 B.$6,300 C.$7,200 D.$7,500 E.None of the above. Instructions Do #5 in Chapter 4. On this question, I want you to not only indicate your choice of ‘lettered answer,’ but also explain and illustrate how you arrived at your answer. In other words, treat it like a short answer question (illustrate with detailed graphs, show calculations, explain the details of what you are doing, etc.). Here’s an IMPORTANT point. Do NOT plug the percentage changes (‘1.5’ and ‘- 0.5’) into the formula for realGDP as the index numbers themselves. Percentage Changes are NOT index numbers. For instance, if X increases from 200 to 203, X has increased by 1.5%. You would NOT plug in ‘1.5’ as X! Use the % changes in nGDP And the GDP deflator to tell if the ‘fraction’ in the formula for realGDP has increased or decreased. If it helps as an analogy, think of the numerator (top of a fraction) as a ‘pot of money’ and the denominator (bottom of a fraction) as the ‘number of persons to share the pot of money equally.’ Then if you know the % change in each (and whether the particular % change is an increase or a decrease), then you should be able to tell if the fraction is increasing, decreasing or staying the same.

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