Year Price of Good 1 Quantity of Good 1 Price of Good 2 Quan

Year

Price of Good 1

Quantity of Good 1

Price of Good 2

Quantity of Good 2

2009

$20

50

$10

20

...

...

...

...

...

2014

$30

60

$20

30

2015

$33

70

$22

35

Consider the table above that shows prices and quantities of two goods produced in a hypothetical country. The base year is 2009. The real GDP in 2014 equals:

Real GDP in 2014 = 1,500

Real GDP in 2014 = 1,600

Real GDP in 2014 = 1,700

Real GDP in 2014 = 1,800

Real GDP in 2014 = 1,900

None of the above.

Solution

Real GDP for a year is calculated by multiplying the total quantity of goods and services produced in a given year by prices of respective goods and services in base year.

The base year in given question is 2009.

Calculate real GDP in 2014 -

Real GDP in 2014 = Quantity of Good 1 produced in 2014 * Price of Good 1 in 2009 + Quantity of Good 2 produced in 2014 * Price of Good 2 in 2009

Real GDP in 2014 = 60 * $20 + 30 * $10

                           = $1,200 + $300

                           = $1,500

The real GDP in 2014 equals $1,500.

Hence, the correct answer is option (1).