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.
Frequently asked questions
What is the correct answer to this question?
₹1,400
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 ₹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.
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.
