Consider a small country producing only two commodities (coffee beans and corn). Following are the price and output of these two commodities in the year 2008: Assuming the price level in the economy remains same while the output of both these products increase by 10 percent in 2009, calculate the value of real GDP in this country for the year 2009?
Price
Quantity
$12
500 lbs. of coffee beans
$6
600 bushels of corn

Question

Quizplus · Accepted Answer

To calculate real GDP, we need to use a constant base year price. In this case, we can use the prices and quantities from the year 2008 as the base year.

The nominal GDP in 2008 would be:

(500 lbs. of coffee beans x $12) + (600 bushels of corn x $6) = $6,000 + $3,600 = $9,600

To calculate real GDP in 2009, we need to multiply the quantities by the 2008 prices and then sum the values.

(550 lbs. of coffee beans x $12) + (660 bushels of corn x $6) = $6,600 + $3,960 = $10,560

Therefore, the value of real GDP in this country for the year 2009 would be $10,560.

Consider a Small Country Producing Only Two Commodities (Coffee Beans