The table below gives the quantities and prices for 2000 and 2010 for an economy that produces just two goods: sailboats and coconuts. For this economy that produces just sailboats and coconuts, and with 2000 is the base year, real GDP was approximately ______ times larger in 2010 than it was in 2000.

Question

The table below gives the quantities and prices for 2000 and 2010 for an economy that produces just two goods: sailboats and coconuts.  For this economy that produces just sailboats and coconuts, and with 2000 is the base year, real GDP was approximately ______ times larger in 2010 than it was in 2000.

Quizplus · Accepted Answer

First note that in order to find real GDP, we must use the prices from the base year in both commutations. So real GDP in 2000 was: (10 sailboats × $500) + (2,000 coconuts × $1) = $7,000. Real GDP in 2010 was (20 sailboats × $500) + (2,400 coconuts × $1) = $12,400. Thus, real GDP in 2010 was 1.77 times larger ($12,400 / 7,000) than in 2000.

The Table Below Gives the Quantities and Prices for 2000