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In a two-good economy base prices are ₹8 and ₹15 and current quantities are 100 and 40. What is real GDP?

Answer and explanation

Correct answer: ₹1,400

Real GDP measures current production using base-year prices, thereby removing the effect of current price changes. For the first good, the value is ₹8 × 100 = ₹800. For the second good, it is ₹15 × 40 = ₹600. Adding these values gives real GDP of ₹800 + ₹600 = ₹1,400. Current prices are not needed for this calculation, so option C is correct.

Related tags

Real GdpBase-Year PricesTwo-Good EconomyNumerical CalculationConstant PricesGdp And WelfareNational Income And Related AggregatesEconomics

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