Question

Year Guns Produced Price of Guns Butter Produced Price of Butter

2009 80 $4 40 $3
2018 90 5 60 10
Consider the following data for Tyrovia, a country that produces only two products: guns and butter.
Real GDP for Tyrovia for 2018 using 2009 as the base year equals:________.
A) $1,140.
B) $880.
C) $690.
D) $540.

Answer 1

$690

Step-by-step explanation:

Tyrovia produces only two products which are guns and butter

In 2009, 80 guns were produced at $4 and 40 butter was produced at $3

In 2018, 90 guns were produced at $5 and 40 butter was produced at $10

Therefore the real GDP for Tyrovia in 2009 using 2018 as the base year can be calculated as follows

= $90×5 + 60×4

= $450 + $240

= $690

Hence the real GDP for Tyrovia is $690