Question

Use the table below to answer the following question. Assume goods B, C, and D are final goods, and good A is an intermediate good. What is the real value of GDP in 2019, using 2018 as a reference year?

Good	P 2018	Q 2018	Pop. 2018	P 2019	Q 2019	Pop. 2019
A	$1.00	100	100	$2.00	200	100
B	$2.00	200	100	$3.00	200	100
C	$3.00	300	100	$3.50	300	100
D	$2.50	400	100	$4.00	500	100

  

A. $2,550

   

B. $3,650

   

C. $2,750

   

D. $2,300

Answer 1

A. $2,550

Since A is an intermediate good, its value will be considered while calculating GDP because as an intermediate good, its value will be calculated elsewhere.

The real value of GDP means the value of goods produced in the year 2019 with the prices of 2018.

Good	P 2018	Q 2019	Pop. 2019
A	$1.00	200
B	$2.00	200	$400.00
C	$3.00	300	$900.00
D	$2.50	500	$1,250.00
Total			$2,550.00

Note that the price column is of 2018 and the quantity column is 2019. The real GDP of 2019 with 2018 as the base year is $2,550