Real GDP is the yearly production of final goods and services valued at:

• A. the average price level of the year
• B. the prices of imported goods
• C. constant prices from a base year
• D. current market prices

Answer: (C)

Verified step by step guidance

1. Understand that Real GDP measures the value of all final goods and services produced within a country in a given year, adjusted for changes in the price level to reflect true economic growth.
2. Recognize that to remove the effect of inflation or deflation, Real GDP is calculated using prices from a base year, which are called constant prices.
3. Identify that using constant prices means valuing the production of goods and services at the prices that prevailed in a specific base year, rather than current market prices or average prices of the current year.
4. Note that prices of imported goods are not used in GDP calculations because GDP only includes goods and services produced domestically.
5. Conclude that Real GDP is the yearly production of final goods and services valued at constant prices from a base year, which allows comparison of economic output across different years without the distortion of price changes.