Below are some data from the land of milk and honey. Year Price of milk GHS Quantity of milk (litres) Price of honey GHS Quantity of honey (litres) 2012 1 100 2 50 2013 1 200 2 100 2014 2 200 4 100 a. Compute nominal GDP, real GDP and the GDP defla

To analyze the data provided for the land of milk and honey, we will compute nominal GDP, real GDP, and the GDP deflator for each year, using 2012 as the base year.

### a. Compute Nominal GDP, Real GDP, and the GDP Deflator

**Nominal GDP** is calculated using current prices.  
**Real GDP** is calculated using base year prices.  
**GDP Deflator** is calculated as (Nominal GDP / Real GDP) x 100.

#### Details for each year:

**Base Year Prices (2012):**
- Price of milk: 1 GHS
- Price of honey: 2 GHS

**2012:**
- Nominal GDP = (Price of milk × Quantity of milk) + (Price of honey × Quantity of honey)  
  = (1 × 100) + (2 × 50) = 100 + 100 = 200 GHS  
- Real GDP = ((1 × 100) + (2 × 50)) = 200 GHS  
- GDP Deflator = (Nominal GDP / Real GDP) × 100 = (200 / 200) × 100 = 100  

**2013:**
- Nominal GDP = (Price of milk × Quantity of milk) + (Price of honey × Quantity of honey)  
  = (1 × 200) + (2 × 100) = 200 + 200 = 400 GHS  
- Real GDP = ((1 × 200) + (2 × 100)) using 2012 prices = (1 × 200) + (2 × 100) = 200 + 200 = 400 GHS  
- GDP Deflator = (Nominal GDP / Real GDP) × 100 = (400 / 400) × 100 = 100  

**2014:**
- Nominal GDP = (Price of milk × Quantity of milk) + (Price of honey × Quantity of honey)  
  = (2 × 200) + (4 × 100) = 400 + 400 = 800 GHS  
- Real GDP = ((1 × 200) + (2 × 100)) = (1 × 200) + (2 × 100) = 200 + 200 = 400 GHS  
- GDP Deflator = (Nominal GDP / Real GDP) × 100 = (800 / 400) × 100 = 200  

### Summary of Results:
| Year | Nominal GDP (GHS) | Real GDP (GHS) | GDP Deflator |
|------|-------------------|----------------|--------------|
| 2012 | 200               | 200            | 100          |
| 2013 | 400               | 400            | 100          |
| 2014 | 800               | 400            | 200          |

### b. Compute Percentage Change in Nominal GDP, Real GDP, and the GDP Deflator

**Percentage change calculation is:**  
\[
\text{Percentage Change} = \left(\frac{\text{Value in Current Year} - \text{Value in Previous Year}}{\text{Value in Previous Year}}\right) \times 100
\]

**From 2012 to 2013:**
- Nominal GDP: 
  \[
  \left(\frac{400 - 200}{200}\right) \times 100 = 100\%
  \]
- Real GDP:
  \[
  \left(\frac{400 - 200}{200}\right) \times 100 = 100\%
  \]
- GDP Deflator:
  \[
  \left(\frac{100 - 100}{100}\right) \times 100 = 0\%
  \]

**From 2013 to 2014:**
- Nominal GDP:
  \[
  \left(\frac{800 - 400}{400}\right) \times 100 = 100\%
  \]
- Real GDP:
  \[
  \left(\frac{400 - 400}{400}\right) \times 100 = 0\%
  \]
- GDP Deflator:
  \[
  \left(\frac{200 - 100}{100}\right) \times 100 = 100\%
  \]

### Summary of Percentage Changes:
| Year Comparison | Nominal GDP Change (%) | Real GDP Change (%) | GDP Deflator Change (%) |
|-----------------|------------------------|---------------------|-------------------------|
| 2012 to 2013    | 100                    | 100                 | 0                       |
| 2013 to 2014    | 100                    | 0                   | 100                     |

**Variable that does not change:**
- The GDP deflator does not change from 2012 to 2013 and only increases from 1 year to the next when the nominal GDP increases as a result of inflation or price changes, indicating that prices in the economy are becoming more inflated compared to the base year.

### c. Economic Well-being in 2013 or 2014

Economic well-being often correlates with real GDP, which reflects actual output based on stable prices.  

- **In 2013**, the real GDP increased significantly by 100%, indicating a robust economic performance with a good increase in output relative to prices.  
- **In 2014**, although nominal GDP grew by 100%, real GDP did not change, indicating that the growth was due solely to increases in prices rather than an actual increase in output.

Therefore, economic well-being likely rose more in 2013 than in 2014 because the increase in real GDP signifies increased economic activity.

### d. Level of GDP vs. Growth Rate of GDP

- The **level of a nation’s GDP** measures the total economic output (i.e., the market value of all final goods and services produced in a country within a specific time frame) and serves as an indicator of the size and health of an economy.
  
- The **growth rate of GDP** measures how fast an economy is growing or expanding over time. It looks at the percentage increase in GDP from one period to another and indicates economic momentum.

### Preference Between High Level of GDP and Low Growth vs. Low Level of GDP and High Growth

Living in a nation with a high level of GDP and a low growth rate might signify stable and wealthy conditions but could also suggest stagnation or lack of innovation. Conversely, a nation with a lower level of GDP but a high growth rate typically suggests emerging opportunities and economic dynamism, which can provide a wealth of opportunities. 

Ultimately, the preference may depend on personal circumstances, goals, and values regarding job opportunities, quality of life, and social welfare. High growth can create more jobs and drive innovation, making it appealing for many individuals regardless of the initial GDP level.