The next questions refer to the following hypothetical economy
In one year, an economy produces 100 units of capital goods, which sell for $30 each, and 200 units of consumer goods, which sell for $10 each. In the second year, 150 units of capital are produced, and sold for $20 each, while 220 units of consumer goods are produced and sold for $20 each. In the third year, 160 units of capital are sold for $30 each, and 200 units of consumer goods are sold for $20 each.
-Using chain-weighted prices with year one as the base year,real GDP in years one,two,and three respectively was
A) 5000, 6428, 6299
B) 5000, 6700, 7200
C) 6000, 6800, 7400
D) 6320, 8900, 8800
E) 6083, 8070, 7909

Question

Quizplus · Accepted Answer

In the base year (year one), real GDP is calculated by multiplying the quantity of goods by their prices in the base year. Thus, for year one, real GDP is (100 units of capital goods * $30) + (200 units of consumer goods * $10) = $3000 + $2000 = $5000. For years two and three, the real GDP must be adjusted using chain-weighted prices, which takes into account the prices from the base year and the current year to adjust for inflation or deflation. This method provides a more accurate reflection of the economy's size and growth over time. The specific calculations for years two and three involve more complex formulas that account for the changes in prices and quantities, leading to the real GDP figures of $6428 and $6299, respectively.

The Next Questions Refer to the Following Hypothetical Economy