Suppose an extremely simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced and sold at $5 each; 11 rugs are produced and sold at $50 each. In the second year, 56 pillows are produced and sold for $5 each; 12 rugs are produced and sold at $60 each.
a. What is nominal GDP in each of the two years?
b. What is the growth rate of nominal GDP?
c. What is real GDP in each year, expressed in terms of constant Year 1 dollars?
d. What is the growth rate of real GDP (in constant Year 1 dollars)?