An economy produces only food and fun. The table shows the quantities produced and prices in 2018 and 2019. The base year is 2019. In 2018 Item Quantity Price Food 91 $2 Using the chained-dollar method, calculate real GDP in 2018 and 2019. $5 Fun 51 In terms of what dollars is each of these two real GDPS measured? In 2019 Real GDP in 2019 using the chained-dollar method is Price Item Quantity Food 80 $5 70 $6 Fun
The term ‘GDP’ or gross domestic product refers to the market value of all services and commodities manufactured within the domestic territory of a economy. It is appropriate measure of a country’s economic condition in a particular year.
Using the information of the commodities (food and fun) produced in an economy the real GDP using chain method has been calculated below.
The value of units of goods produced in 2018 at 2018 prices:
= 91*2 + 51*5
= $ 437
The value of units of goods produced in 2018 at 2018 prices = $ 437
The value of units of goods produced in 2019 at 2018 prices,
= 80*2 + 70*5
= $ 510
The value of units of goods produced in 2018 at 2019 prices,
= 91*5 + 51*6
= $ 761
The value of units of goods produced in 2019 at 2019 prices,
= 80*5 + 70*6
= $ 820
So, the value of real GDP in 2019 (base year) is $ 820.
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