Assume that a small country produces only green peppers and red peppers. last year, it produced 100 green peppers and 50 red peppers and sold them at prices of $2 per green pepper and $3 per red pepper. this year, it produced 150 green peppers and 60 red peppers and sold them at prices of $2 per green pepper and $4 per red pepper. what is real gdp this year if the base year is last year

The correct answer is $480.

Explanation:

Real GDP is the value of economic output calculated in an economy in a year. It is an inflation-adjusted measure. IT calculates growth in GDP on the basis of base year price. So, the change in price is not included and only change in output is included.  

The price of green pepper in the base year was $2. The price of red pepper was $3.

Real GDP

= 150 × $2 + 60 × $3

= $300 + $180

= $480

The real GDP in the current year is $480.

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