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Suppose that for the United States, nominal GDP is $18 trillion for 2016. Assume further that...

Suppose that for the United States, nominal GDP is $18 trillion for 2016. Assume further that the price of the market basket in 2018 is $3,200 whereas the same market basket in the year 2000 fetched a price of $2,000. If the year 2000 is the base year, what is real GDPin 2016(rounded to the nearest trillion)?

A. $40.9
B $28.8
C $11.25
D $7
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Answer #1

Answer
the price index in 2000 is 100 because the year 2000 is the base year
in the year 2018 price index=(3200/2000)*100
=160
The real GDP in 2018 is =(Nominal GDP/price index in 2018)*price index in the base year
=(18/160)*100
=11.25
Option C
$11.25 trillion

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