Table 4.20 A very simple economy produces three goods: cameras, legal services, and books.The quantities produced and their corresponding prices for 2007 and 2017 are shown in the table above.
-Refer to Table 4.20.What is real GDP in 2017, using 2007 as the base year?

Question

Table 4.20  A very simple economy produces three goods: cameras, legal services, and books.The quantities produced and their corresponding prices for 2007 and 2017 are shown in the table above.
-Refer to Table 4.20.What is real GDP in 2017, using 2007 as the base year?

Quizplus · Accepted Answer

To calculate real GDP, we need to use constant prices from a fixed base year. We will calculate real GDP in 2017 using 2007 as the base year. 
Nominal GDP in 2017 is the sum of the value of all goods and services produced in 2017 at current prices. 
Nominal GDP in 2017 = (30 x $250) + (250 x $150) + (1500 x $20) = $16,500 
To get real GDP in 2017, we need to calculate the value of goods and services produced in 2017 using 2007 prices. This is done by multiplying the quantities produced in 2017 by their 2007 prices. 
Real GDP in 2017 = (30 x $200) + (250 x $125) + (1500 x $15) = $10,275

Table 420 a Very Simple Economy Produces Three Goods: Cameras