Imagine that an economy produces two goods, flashlights and fishing lures. In 2015, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. In 2016, the economy produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $7 and $15, respectively.

Based on the information in Scenario 1, real GDP grew by about

A) $830

B) $1,025

C) $1,090

D) $1,345

Question

Wyatt Mack

Business

31 December, 06:45

Imagine that an economy produces two goods, flashlights and fishing lures. In 2015, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. In 2016, the economy produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $7 and $15, respectively.

Based on the information in Scenario 1, real GDP grew by about

A) $830

B) $1,025

C) $1,090

D) $1,345

+1

Answers (1)

Know the Answer?

Felicity Burns · Answer 1

B) $1,025

Explanation:

Gross domestic product is the total output produced by an economy within a given period which is usually a year.

Real GDP calculates the GDP without the effects of inflation.

To calculate real GDP, a base year price is used.

In this question, the base year prices would be the 2015 prices.

GDP in 2015 = (70 * $5) + (40 * $12) = $830

Real GDP in 2016 = (85 * $5) + (50 * 12) = $1,025.

Real GDP grew by : $1025 - $830 = $195