The table below indicates the price and output data over a five year period for an economy that produces only one good.

-Refer to the above data.If year 2 is the base year,the percentage increase in real GDP from year 2 to year 4 is:
A) 40 percent.
B) 60 percent.
C) 100 percent.
D) 80 percent.

Question

The table below indicates the price and output data over a five year period for an economy that produces only one good.
 
-Refer to the above data.If year 2 is the base year,the percentage increase in real GDP from year 2 to year 4 is:
A) 40 percent. 
B) 60 percent. 
C) 100 percent. 
D) 80 percent.

Quizplus · Accepted Answer

To calculate the real GDP, we need to use a constant base year's output and adjust for price changes in other years. In this case, we are using year 2 as the base year.

Real GDP in year 2 = $10 x 100 = $1000

To calculate real GDP for year 4, we need to use year 4's output at year 2's prices.

Real GDP in year 4 = $15 x 120 = $1800

The percentage increase in real GDP from year 2 to year 4 is:

(Real GDP in year 4 - Real GDP in year 2) / Real GDP in year 2 x 100%

= ($1800 - $1000) / $1000 x 100%

= 80%

Therefore, the answer is D) 80 percent.

The Table Below Indicates the Price and Output Data Over