Use the following information to answer the next several questions:
Scenario 1: Imagine that an economy produces two goods, flashlights and fishing lures. In 2011, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. In 2012, the economy produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $7 and $15, respectively.
-Based on the information in Scenario 1, real GDP in 2012 (in 2011 dollars)in this economy was

Question

Quizplus · Accepted Answer

Real GDP in 2012 (in 2011 dollars) = Nominal GDP in 2012 / GDP deflator in 2012 (in 2011 dollars). 
Nominal GDP in 2012 = (85 x $7) + (50 x $15) = $895 + $750 = $1,645. 
GDP deflator in 2012 (in 2011 dollars) = (85 x $5) + (50 x $12) = $425 + $600 = $1,025. 
Real GDP in 2012 (in 2011 dollars) = $1,645 / $1,025 = $1.60 x 1,000 = $1,600. Therefore, the correct answer choice is B.

Use the Following Information to Answer the Next Several Questions