For the following question(s), suppose that an economy produces only food and clothing, and that price and quantity data are given in the table below.

-Suppose that Year 1 is the base year.Year 2 real GDP is
A) $200.
B) $270.
C) $310.
D) $390.
E) $450.

Question

For the following question(s), suppose that an economy produces only food and clothing, and that price and quantity data are given in the table below.

-Suppose that Year 1 is the base year.Year 2 real GDP is
A) $200. 
B) $270. 
C) $310. 
D) $390. 
E) $450.

Quizplus · Accepted Answer

To calculate real GDP, we need to use constant prices from the base year. So, to calculate real GDP in Year 2, we need to multiply Year 2 quantities by Year 1 prices.

Real GDP in Year 2 = (Year 1 price of food x Year 2 quantity of food) + (Year 1 price of clothing x Year 2 quantity of clothing)

= ($5 x 50) + ($10 x 20)

= $250 + $60

= $310

Therefore, the answer is C.

For the Following Question(s), Suppose That an Economy Produces Only