Question

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

Answer 1

B) $1,025

Step-by-step 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