A south sea island produces only coconuts.In 2005, the price of a coconut is $2.00 and the quantity produced is 4 2017, the price of a coconut is $1.50 and the quantity produced is 350. 2005 is the reference base year.Real GDP in 2017 in terms of base- year prices is

Question

Quizplus · Accepted Answer

To calculate the real GDP in terms of base-year prices, we need to use the base-year quantity and multiply it by the current price. 
Using 2005 as the base year:
Base year GDP = 4 coconuts x $2.00/coconut = $8.00
Real GDP in 2017 = Base year quantity x Current year price 
Real GDP in 2017 = 4 coconuts x $1.50/coconut = $6.00
Therefore, the real GDP in 2017 in terms of base-year prices is $7.00.

A South Sea Island Produces Only Coconuts