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.
Frequently asked questions
What is the correct answer to this question?
₹1,560
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
