Homework SourseSuppose nominal 1920 GDP was 5000 The GDP Deflator Decimal f
Suppose nominal 1920 GDP was $5,000. The GDP Deflator Decimal for 1920 using 2009 as a base year is 0.10. (Index = 10). What is the real 1920 GDP in chained, 2009 dollars?
a) $50,000
b) $10,000
c) $5,000
d) $500
e) $100
Suppose nominal 1920 GDP was $5,000. The GDP Deflator Decimal for 1920 using 2009 as a base year is 0.10. (Index = 10). What is the real 1920 GDP in chained, 2009 dollars?
a) $50,000
b) $10,000
c) $5,000
d) $500
e) $100
Suppose nominal 1920 GDP was $5,000. The GDP Deflator Decimal for 1920 using 2009 as a base year is 0.10. (Index = 10). What is the real 1920 GDP in chained, 2009 dollars?
a) $50,000
b) $10,000
c) $5,000
d) $500
e) $100
Solution
Correct option is (a).
Real GDP = (Nominal GDP / GDP Deflator) x 100 = ($5,000 / 10) x 100 = $50,000
[Alternatively, Real GDP = Nominal GDP / GDP Deflator decimal = $5,000 / 0.1 = $50,000]
