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 1?
A)$300
B)$418
C)$294
D)$338
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 1?
A)$300
B)$418
C)$294
D)$338
E)$360

Quizplus · Accepted Answer

Real GDP using base year 1 is calculated by multiplying the quantities produced in year 2 by the prices in year 1. 
Real GDP = (17 pens $	imes$ \$12 per pen in year 1) + (12 pencils $	imes$ \$12 per pencil in year 1) 
Real GDP = \$204 + \$144 
Real GDP = \$348 
Therefore, the best choice is D.

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