Year Price of Good 1 Quantity of Good 1 Price of Good 2 Quantity of Good 2 2009
ID: 1258735 • Letter: Y
Question
Year
Price of Good 1
Quantity of Good 1
Price of Good 2
Quantity of Good 2
2009
$20
50
$10
20
...
...
...
...
...
2014
$30
60
$20
30
2015
$33
70
$22
35
Consider the table above that shows prices and quantities of two goods produced in a hypothetical country. The base year is 2009. The real GDP in 2014 equals:
Real GDP in 2014 = 1,500
Real GDP in 2014 = 1,600
Real GDP in 2014 = 1,700
Real GDP in 2014 = 1,800
Real GDP in 2014 = 1,900
None of the above.
Year
Price of Good 1
Quantity of Good 1
Price of Good 2
Quantity of Good 2
2009
$20
50
$10
20
...
...
...
...
...
2014
$30
60
$20
30
2015
$33
70
$22
35
Explanation / Answer
Real GDP for a year is calculated by multiplying the total quantity of goods and services produced in a given year by prices of respective goods and services in base year.
The base year in given question is 2009.
Calculate real GDP in 2014 -
Real GDP in 2014 = Quantity of Good 1 produced in 2014 * Price of Good 1 in 2009 + Quantity of Good 2 produced in 2014 * Price of Good 2 in 2009
Real GDP in 2014 = 60 * $20 + 30 * $10
= $1,200 + $300
= $1,500
The real GDP in 2014 equals $1,500.
Hence, the correct answer is option (1).
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