Answered: GDP deflator = (Nominal GDP/Real GDP) x…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

GDP deflator = (Nominal GDP/Real GDP) x 100

Nominal GDP = Current Price x Current Quantity
Nominal GDP (2020) = 10 x 4,000 + 30 x 1,000 = 40,000+30,000 = 70,000
Nominal GDP (2021) = 12 x 6,000 + 50 x 1,200 = 72,000 + 60,000 = 132,000

Real GDP = Base year price x Current Quantity
Real GDP (2020) = 10 x 4,000 + 30 x 1,000 = 40,000 + 30,000 = 70,000
Real GDP (2021) = 1..

Expert Solution

Step 1

Given information:

Nominal GDP₂₀₂₀ = 70,000

Nominal GDP₂₀₂₁ = 132,000

Real GDP₂₀₂₀=70,000

The formula for calculating GDP deflator is given below.

$GDP deflator = \frac{Nominal GDP}{Real GDP} \times 100 . . . (1)$

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