In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your
answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional
changes
(Score for Question 1:
of 20 points)
1
Below are some data from the land of milk and honey.
Year
Price of Milk
Quantity of Milk
Price of Honey
Quantity yof
Honey
50 quarts
100
100
S
2016
2017
2018
100 quarts
200
200
61
(a) Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year.
(b) Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2017 and 2018
from the preceding year. For each year, identify the variable that does not change. Explain why your
answer makes sense.
(c) Did economic well-being increase more in 2017 or 2018? Explain.
Type your answer here: