Consider an economy where factor supply is 2.5 million units, the factor utilization rate is 0.85 and a simple measure of productivity (GDP per factor employed)is $200. This economy's GDP is
A)$2.125 million
B)$425 million
C)$200 million
D)$500 million
E)$525 million

Question

Quizplus · Accepted Answer

The GDP is calculated by multiplying the factor supply by the factor utilization rate and then by the productivity per factor employed: 2.5 million units * 0.85 * $200 = $425 million.

Consider an Economy Where Factor Supply Is 2