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 grew by about ________ percent from 2011 to 2012.

Question

Quizplus · Accepted Answer

Real GDP growth is calculated using constant prices from a base year. Using 2011 prices, real GDP in 2011 is (70 flashlights * $5) + (40 lures * $12) = $350 + $480 = $830. In 2012, real GDP is (85 flashlights * $5) + (50 lures * $12) = $425 + $600 = $1025. The growth rate is (($1025 - $830) / $830) * 100% = 23.49%, approximately 23%.

Use the Following Information to Answer the Next Several Questions