An economy produces only cell phones. In 2015, the economy manufactured 275 cell phones, and each cell phone sold for $200. In 2016, the economy manufactured 280 cell phones, but the price of each cell phone fell to $180.
-Refer to the scenario above. Using 2016 as the base year, what was the real GDP of the economy in 2015?

Question

Quizplus · Accepted Answer

Real GDP for a given year is calculated by taking the quantity of goods produced in that year and multiplying it by the base year's prices. In this case, the base year is 2016, where the price of each cell phone is $180. In 2015, the economy produced 275 cell phones. Therefore, the real GDP for 2015, using 2016 prices, is 275 cell phones * $180/cell phone = $49,500.

An Economy Produces Only Cell Phones