Real gross domestic product (GDP)is equal to

Question

Quizplus · Accepted Answer

Real GDP is calculated by multiplying the quantities produced in the current year (current output) by the prices of the base year (base year prices). This is because real GDP measures the value of output in constant prices, which allows for comparison of economic activity over time. Option A and B use current prices which are not adjusted for inflation, while option C uses base year prices to measure base year output, which is not relevant for calculating current economic activity. Option E is incorrect as it calculates GDP deflator (a measure of inflation) instead of real GDP.

Real Gross Domestic Product (GDP)is Equal to