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Scenario: Real GDP
Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each.
-(Scenario: Real GDP) Look at the scenario Real GDP. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is:
A)10%.
B)7.8%.
C)19.7%.
D)8.8%.

Question

Quizplus · Accepted Answer

The growth rate of real GDP is calculated as the percentage change in real GDP from one year to the next. Real GDP is calculated as the value of all goods and services produced in an economy in a given year, adjusted for inflation. In this case, the value of goods and services produced in year 1 is $100 x $3 + $75 x $8 = $575. The value of goods and services produced in year 2 is $110 x $3.25 + $80 x $9 = $632.50. The growth rate of real GDP from year 1 to year 2 is therefore ($632.50 - $575) / $575 x 100% = 7.8%.

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