The table shows the quantities produced and prices in 2015 and 2016 for an In 20

Question

The table shows the quantities produced and prices in 2015 and 2016 for an In 2015 Item economy which produces only food and fun The base year is 2016 Calculate real GDP in 2015 and 2016 using the chained dollar method Quantity 94 54 Price $1 $2 Food Fun In terms of what dollars is each of these two real GDPs measured2 ....". ' In 2016 Item Real GDP in 2016 using the chained-dollar method is Price $6 $10 Quanti Food Real GDP in 2015 using the chained-dollar method is ... ···-' t Fun- >>>Answer with a whole number Real GDP n 2015 and real GDP in 2016 are measured in.. | dollars t

Explanation / Answer

To calculate Real GDP by chained dollar method prices of goods in base year is taken to calculate GDP of all the years. This practice of using constant prices across the years for calculating GDP is called calculating GDP using constant dollars. This GDP is inflation corrected and useful in measuring and comparising GDP of two years. In this method nominal GDP and real GDP remain same for base year as prices of base year are used in all calculations. In this case the base year is 2016, so GDP will be calculated at the prices of goods in this year.

Real GDP 2016 = Prices in 2016 * Quantity produced in 2016 = (78*6) + (66*10) = $1128

Real GDP 2015 = Prices in 2016 * Quantity produced in 2015 = (94*6) + (54*10) = $1104

Real GDP in 2015 and Real GDP in 2016 are measured in Constant dollars.

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