Use the table to answer the question.

Question

2000 2001
Quantity Price ($) Quantity Price ($)
Sunglasses 80 10 100 12
Sunscreen 100 8 50 10
The table above gives the quantities and prices for a hypothetical economy that only produces sunglasses and sunscreen. What is the growth rate of Nominal GDP from 2000 to 2001?

(1 point)
Responses

6.25%
6.25 percent

−106.25%
negative 106.25 percent

−6.25%
negative 6.25 percent

106.25%

Answer 1

To calculate the growth rate of Nominal GDP from 2000 to 2001, we first need to calculate the Nominal GDP for both years.

Nominal GDP for 2000:

• Sunglasses: Quantity = 80, Price = $10
• Sunscreen: Quantity = 100, Price = $8

\[ \text{Nominal GDP}{2000} = (80 \times 10) + (100 \times 8) \] \[ \text{Nominal GDP}{2000} = 800 + 800 = 1600 \]

Nominal GDP for 2001:

• Sunglasses: Quantity = 100, Price = $12
• Sunscreen: Quantity = 50, Price = $10

\[ \text{Nominal GDP}{2001} = (100 \times 12) + (50 \times 10) \] \[ \text{Nominal GDP}{2001} = 1200 + 500 = 1700 \]

Now, we can calculate the growth rate of Nominal GDP: \[ \text{Growth Rate} = \left( \frac{\text{Nominal GDP}{2001} - \text{Nominal GDP}{2000}}{\text{Nominal GDP}_{2000}} \right) \times 100 \] \[ \text{Growth Rate} = \left( \frac{1700 - 1600}{1600} \right) \times 100 \] \[ \text{Growth Rate} = \left( \frac{100}{1600} \right) \times 100 \] \[ \text{Growth Rate} = 0.0625 \times 100 = 6.25% \]

Thus, the growth rate of Nominal GDP from 2000 to 2001 is 6.25%.