Question

Question 2

If Nominal GDP is $12,000 billion and the GDP deflator is 80, then Real GDP is ________.

a) $15,000 billion

b) $9,600 billion

c) $21,600 billion

Question 3

If inflation occurs in a given year,

a) the change in the real measurement (GDP) would be equal to the change in the nominal one.

b) the change in the real measurement (GDP) would be greater than the change in the nominal one.

c) the change in the real measurement (GDP) would be smaller than the change in the nominal one.

Answer 1

1) GDP deflator = (nominal GDP ÷ real GDP)×100

80 = (12,000÷R) ×100

R = $15,000

Option a.

2) When there is neither inflation nor deflation, nominal GDP = real GDP.

If there is inflation, real GDP is lower than nominal GDP.

If there is deflation, real GDP is more than nominal GDP.

Option c.