Question

Fill in the missing information: Year Nominal GDP Real GDP GDP Deflator 1 $8,000 billion $8,000 billion 100 $ 2 $9,028.8 billion 108 billion 3 $9,806.28 $8,527.2 billion The economy's growth rate is % from year 1 to year 2 and % from year 2 to year 3.

Answer 1

Year Nominal GDP Real GDP GDP deflator 1 8000 8000 100 9028.8 8360 108 N 3 9806.28 8527.2 115

The real GDP is affected by the change in the production of output in the country but nominal GDP is affected by both price change and output change in the country.

Real GDP = (nominal GDP / GDP deflator)*100

GDP deflator= (Nominal GDP/ real GDP)*100

Economic growth is an expansion of national output measured by the annual percentage increase in the nation’s level of real GDP.

Economic growth rate from year 1 to year 2

= [(Real GDP of year 2 – real GDP of year 1)/ real GDP of year 1]*100

=[(8360-8000)/8000]*100

=4.5%

Economic growth rate from year 2 to year 3

= [(Real GDP of year 3 – real GDP of year 2)/ real GDP of year 2]*100

=[(8527.2-8360)/8360]*100

=2%