Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, real GDP in year 2 is:

Question

Quizplus · Accepted Answer

Real GDP in year 2 is calculated using the prices from the base year (year 1) but the quantities from year 2. Therefore, for golf balls: 110 balls * $3/ball = $330. For pizzas: 80 pizzas * $8/pizza = $640. Adding these together gives $330 + $640 = $970.

Suppose That, in Year 1, an Economy Produces 100 Golf