A country produces only one good. It produced 5,000 units of the good during Year 1 and 6,000 units of the good in Year 2. The price of each unit of the good in Year 1 was $280 and it was $320 in Year 2. Suppose Year 1 is taken as the base year for the calculation of GDP.
-Refer to the scenario above. The real GDP of the country in Year 1 was ________.
A) $1,400,000
B) $280,000
C) $540,000
D) $2,200,000

Question

Quizplus · Accepted Answer

Real GDP for Year 1 is calculated by multiplying the quantity of goods produced in Year 1 by the price of goods in the base year (Year 1). Therefore, Real GDP in Year 1 = 5,000 units * $280/unit = $1,400,000.

A Country Produces Only One Good