Exhibit 11-4

-Refer to Exhibit 11-4.Measured in terms of Year 1 prices,real GDP is:

Question

Exhibit 11-4
 
-Refer to Exhibit 11-4.Measured in terms of Year 1 prices,real GDP is:

Quizplus · Accepted Answer

Real GDP is calculated in terms of constant prices of a particular base year. In this case, the base year is Year 1. Real GDP is calculated by multiplying the quantities produced in the current year with the prices of the base year. Hence, the formula to calculate real GDP is: Real GDP = Quantity produced in the current year x Price of the base year. Using this formula, we can calculate that real GDP in Year 2 is 150 x 5 = 750 (measured in terms of Year 1 prices). Therefore, the correct answer is B) 750.

Exhibit 11-4 -Refer to Exhibit 11-4.Measured in Terms of Year 1 Prices,real