2012 2013 Quantity Prices S Quantity Prices S Pen 100 Shirt

2012 2013 Quantity Prices (S) Quantity Prices (S) Pen 100 Shirt 20 1600.5 22 22.50

Solution

(d)Real GDP by chain weighted method

= prices of 2012*quantity of 2013

=1*160+5*22

=160+110

=270

(E)

Since the real GDP measure the GDP at base year price, so if the real GDP increases, it means more good and services have been produced in the economy, it means economic growth.

The real GDP is a better measure of economic growth because it is adjusted with the inflation.