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Answer :
To solve this problem, we need to find the nominal GDP given the real GDP and the GDP deflator. Here's a step-by-step explanation:
1. Understand the Terminology:
- Real GDP: This measures the value of economic output adjusted for price changes (inflation or deflation).
- GDP Deflator: This is a price index that measures the level of prices of all new, domestically produced, final goods and services in an economy.
- Nominal GDP: This measures the value of economic output without any adjustments for inflation.
2. Formula Needed:
The relationship between nominal GDP, real GDP, and the GDP deflator is given by the formula:
[tex]\[
\text{Nominal GDP} = \text{Real GDP} \times \left(\frac{\text{GDP Deflator}}{100}\right)
\][/tex]
3. Plug in the Values:
- Real GDP = [tex]$5 trillion
- GDP Deflator = 200
4. Calculate Nominal GDP:
- Substitute the given values into the formula:
\[
\text{Nominal GDP} = 5 \times \left(\frac{200}{100}\right)
\]
5. Simplify the Calculation:
- First, divide the GDP deflator by 100:
\[
\frac{200}{100} = 2
\]
- Then, multiply the result by the real GDP:
\[
5 \times 2 = 10
\]
6. Final Result:
- The nominal GDP is $[/tex]10 trillion.
So, the correct answer is $10 trillion.
1. Understand the Terminology:
- Real GDP: This measures the value of economic output adjusted for price changes (inflation or deflation).
- GDP Deflator: This is a price index that measures the level of prices of all new, domestically produced, final goods and services in an economy.
- Nominal GDP: This measures the value of economic output without any adjustments for inflation.
2. Formula Needed:
The relationship between nominal GDP, real GDP, and the GDP deflator is given by the formula:
[tex]\[
\text{Nominal GDP} = \text{Real GDP} \times \left(\frac{\text{GDP Deflator}}{100}\right)
\][/tex]
3. Plug in the Values:
- Real GDP = [tex]$5 trillion
- GDP Deflator = 200
4. Calculate Nominal GDP:
- Substitute the given values into the formula:
\[
\text{Nominal GDP} = 5 \times \left(\frac{200}{100}\right)
\]
5. Simplify the Calculation:
- First, divide the GDP deflator by 100:
\[
\frac{200}{100} = 2
\]
- Then, multiply the result by the real GDP:
\[
5 \times 2 = 10
\]
6. Final Result:
- The nominal GDP is $[/tex]10 trillion.
So, the correct answer is $10 trillion.
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