For the following question(s), suppose an economy produces only pens and pencils, and that the quantity and price data is given by
this table: $$\begin{array} { | l | l | l | }
\hline & \text { Pens } & \text { Pencils } \
\hline \text { Year 1 quantity } & 15 & 10 \
\hline \text { Year 1 price } & \$ 12 & \$ 12 \
\hline \text { Year 2 quantity } & 17 & 12 \
\hline \text { Year 2 price } & \$ 14 & \$ 15 \
\hline
\end{array}$$
-What is the real GDP in year 2 using base year 2?
A)$414
B)$418
C)$338
D)$300
E)$360

Question

For the following question(s), suppose an economy produces only pens and pencils, and that the quantity and price data is given by
this table: $$\begin{array} { | l | l | l | } 
\hline & \text { Pens } & \text { Pencils } \
\hline \text { Year 1 quantity } & 15 & 10 \
\hline \text { Year 1 price } & \$ 12 & \$ 12 \
\hline \text { Year 2 quantity } & 17 & 12 \
\hline \text { Year 2 price } & \$ 14 & \$ 15 \
\hline
\end{array}$$
-What is the real GDP in year 2 using base year 2?
A)$414
B)$418
C)$338
D)$300
E)$360

Quizplus · Accepted Answer

Real GDP is calculated by multiplying the quantity of goods by their prices in the base year. Using base year 2, the quantity of pens and pencils in year 2 are multiplied by their respective prices in year 2, and then adjusted to base year 2 prices.

Real GDP in year 2 = (17 x \$14) + (12 x \$15) / (\$14 + \$12) x 100 = \$418.

For the Following Question(s), Suppose an Economy Produces Only Pens