Homework Answers
5. Price level in 2018 must be higher than base year level.
Real GDP = Nominal GDP / CPI
where,
CPI:- consumer price index
Therefore, real GDP is nothing but inflation adjusted GDP. Since the value of real GDP is less than the value of the nominal GDP we can see that the consumer price index (CPI) value is greater than 1. This means that the price level in 2018 is higher than the base year price level.
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