Suppose the nominal GDP in 2005 was 3 trillion in the 1st qu

Suppose the nominal GDP in 2005 was $3 trillion in the 1st quarter, $2 trillion in the 2nd quarter, $2.5 trillion in the 3rd quarter and $2.5 trillion in the 4th quarter. In 2006, the nominal GDP was $3 trillion in the 1st quarter, $3 trillion in the 2nd quarter, $2 trillion in the 3rd quarter, and $2 trillion in the 4th quarter. Suppose the annual inflation rate between 2005 and 2006 was 2%. The annual real GDP growth rate between 2005 and 2006 was a. minus 2% b. 0% C. 2% d. 4%

Solution

Option b. 0%

Quarters

Nominal GDP (t)

Yearly average GDP

Real GDP

Growth rate

2005

1

3

2

2

2.5

2.45

3

2.5

4

2.5

2006

1

3

2

3

2.5

2.45

0

3

2

4

2

	Quarters	Nominal GDP (t)	Yearly average GDP	Real GDP	Growth rate
2005	1	3
	2	2	2.5	2.45
	3	2.5
	4	2.5
2006	1	3
	2	3	2.5	2.45	0
	3	2
	4	2