If we calculate the real GDP using the initial period's prices,we are using a __________ index.If,instead,we use the final period's prices,we are using a __________ index.
A)Paasche;chain-weighted
B)Laspeyres;chain-weighted
C)Laspeyres;Paasche
D)Paasche;Laspeyres
E)chain-weighted;Paasche

Question

Quizplus · Accepted Answer

When we calculate the real GDP using initial period's prices, we are using the Laspeyres Index. This index uses a fixed basket of goods and services from the base year and compares it with the prices in the current year to measure inflation. 
When we calculate the real GDP using final period's prices, we are using the Paasche Index. This index uses a basket of goods and services from the current year and compares it with the prices in the base year to measure inflation. 
Therefore, the best choice is C) Laspeyres; Paasche, since it correctly identifies the two indices used for calculating real GDP with different price measures.

If We Calculate the Real GDP Using the Initial Period's