Question

Assume that this economy produces only two goods, Good X and Good Y. If Year 1 is the base year, the value for this economy's real GDP in Year 2 is:

a) $150
b) $200
c) $225
d) $250

Answer 1

The value for this economy's real GDP in Year 2 is $3,030 billion.

GDP is calculated using the formula: GDP = C + I + G + (X - M), where C represents consumption spending, I represents business investment, G represents government purchases, X represents export sales, and M represents imports.

In Year 2, the values given are C = $2,000 billion, I = $50 billion, G = $1,000 billion, X = $20 billion, and M = $40 billion.

Substituting these values into the formula, we have: GDP = $2,000 billion + $50 billion + $1,000 billion + ($20 billion - $40 billion).

Simplifying the equation, we get: GDP = $3,030 billion.