ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If the nominal GDP in a given year is $500 billion and the GDP deflator for that year is 125, how much is the real GDP?
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$1, 125 billion
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$625 billion
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$500 billion
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$400 billion
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$375 billion
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Explanation:
Detailed explanation-1: -Divide the nominal GDP by the GDP deflator and multiply by 100. This will give you the real GDP.
Detailed explanation-2: -To calculate the GDP deflator, the formula is Nominal/Real x 100. In the example above the GDP Deflator for 1980 is 100 ($500/$500 x 100 = 100). The GDP deflator for the base year is always 100. The GDP deflator for 2017 is 342.86 ($3000/$875 x 100 = 342.86).
Detailed explanation-3: -The GDP deflator is nominal GDP/real GDP times 100. In this case, 15/12 * 100 = 125.
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