10 The following data show nominal GDP and the appropriate p

10. The following data show nominal GDP and the appropriate price index for several years. Compute real GDP for each year and indicate whether you have \"inflated\" or \"deflated\" nominal GDP in finding real GDP. All GDP are in billions. Nominal Price level Inflated (1) Deflated (D) YearGDP $117 2 124 3 143 index 120 104 85 96 112_ 143 Real GDP 149 178 220 5

Solution

formula for Real GDP= first divide price index/100, then the answer is percent of price index .that we have to divide normal GDP / percent of price index

Example for year 1 = 120/100

=1.20

real GDP = normal GDP/ percent of price index

= 117/1.20

= $98

If real GDP < Normal = deflated

If real GDP > Normal = Inflated

Year	GDP $	Index	Real GDP	Inflated(I)/Deflated(D)
1	117	120	98	D
2	124	104	119	D
3	143	85	168	I
4	149	96	155	I
5	178	112	159	D
6	220	143	154	D