Consider an economy that produces only DVDs and DVD players.Last year,10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each,whereas this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each.Real GDP this year using last year as the base year is:
A) $100.
B) $700.
C) $1 300.
D) $300

Question

Quizplus · Accepted Answer

To calculate real GDP using last year as the base year, we need to use constant prices (i.e., prices from last year).

Last year's nominal GDP was: 
10 DVDs * $20 = $200 
5 DVD players * $100 = $500 
Total = $700

This year's nominal GDP is: 
15 DVDs * $20 = $300 
10 DVD players * $100 = $1,000 
Total = $1,300

To calculate real GDP: 
Real GDP = (Quantity this year * Price last year) + (Quantity this year * Price last year) 
Real GDP = (15 * $20) + (10 * $100) 
Real GDP = $300 + $1,000 
Real GDP = $1,300

Therefore, the correct choice is C.

Consider an Economy That Produces Only DVDs and DVD Players