Thank you for visiting Assume that between 1998 and 2008 nominal GDP increased from 7 trillion to 12 trillion and that the price index rose from 100 to 133. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
the correct answer is b. $9.0 trillion. To express GDP for 2008 in terms of 1998 prices, we need to adjust for the change in the price level over that period.
Nominal GDP in 1998 = $7 trillion
Nominal GDP in 2008 = $12 trillion
Price index in 1998 = 100
Price index in 2008 = 133.3To calculate GDP in 2008 in terms of 1998 prices:
Real GDP (2008) = (Nominal GDP (2008) / Price index (2008)) * Price index (1998)
Real GDP (2008) = ($12 trillion / 133.3) * 100
Real GDP (2008) = $9.0 trillion
Therefore, the correct answer is b. $9.0 trillion.
This calculation adjusts the nominal GDP for changes in the price level, allowing us to compare economic output in 2008 with constant 1998 prices. By doing so, we can measure the real growth of the economy while accounting for inflation or deflation effects. In this case, the real GDP in 2008, expressed in terms of 1998 prices, is $9.0 trillion.
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