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In a two-good economy base prices are ₹12 and ₹25 and current quantities are 80 and 24. What is real GDP?

Answer and explanation

Correct answer: ₹1,560

Real GDP measures current production using base-year prices, thereby removing the effect of current price changes. For the first good, the value is ₹12 × 80 = ₹960. For the second, it is ₹25 × 24 = ₹600. Adding these values gives real GDP = ₹960 + ₹600 = ₹1,560. Hence option C is correct; using current prices or adding the inputs incorrectly would produce the other figures.

Related tags

Real GdpBase-Year PricesConstant PricesNumerical CalculationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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