AP Economics Chapter 6

Class Work Problems: Please answer the following questions.

1. The economy of Britannica produces three goods: computers, DVD’s and

pizza. The accompanying table shows the prices and output of the three
goods for the years 2002, 2003 and 2004

Computers DVDs Pizza

Year Price Quantity Price Quantity Price Quantity
2002 $900 10 10 100 15 2
2003 1000 10.5 12 105 16 2
2004 1050 12 14 110 17 3

a. What is the percentage change in production of each of the goods from 2002
to 2003 and from 2003 to 2004?
b. What is the percent change in prices of each of the goods from 2002 to 2003
and from 2003 to 2004?
c. Calculate nominal GDP in Britannica for each of the three years. What is the
percentage change in nominal GDP from 2002 to 2003 and from 2003 to
2004?
d. Calculate real GDP in Britannica using 2002 prices for each of the three
years. What is the percent change in real GDP from 2002 to 2003 and from
2003 to 2004?

2. The accompanying table shows data on nominal GDP (in billions of dollars),
real GDP (in billions of dollars) using 2000 as the base year, and population
(in thousands) of the US in 1960, 1970, 1980, 1990, 2000 and 2004, years in
which the US price level consistently rose.

Year Nominal GDP Real GDP (billions Population

(billions of dollars) of 2000 dollars) (thousands)
1960 $526.4 $2501.8 180671
1970 1038.5 3771.9 205052
1980 2789.5 5161.7 227726
1990 5803.1 7112.5 250132
2000 9817.0 9817.0 282388
2004 11734.0 10841.9 293907

a. Why is real GDP greater than nominal GDP for all years before 2000 and
lower for 2004? Does nominal GDP have to equal real GDP in 2000?
b. Calculate the percent change in real GDP from 1960 to 1970, 1970 to 1980,
1980 to 1990 and 1990 to 2000. Which period had the highest growth rate?
 3. The following table shows nominal GDP and an appropriate price index for a
group of selected years. Compute real GDP.

Year Nominal GDP. Price Index (2000= Real GDP, Billions

Billions 100)
1964 $663.6 22.13
1974 1500.0 34.73
1984 3933.2 67.66
1994 7072.2 90.26
2004 11734.3 109.10