A nation's nominal GDP is $1.5 trillion with an inflation rate of 5%. ∴ Real GDP is 30 trillion.
Explanation:
Key Terms
GDP deflator: A measure of the level of prices of all new, domestically produced, final goods and services in an economy. It is calculated by computing the ratio of nominal GDP to the real measure of GDP.
real GDP: A macroeconomic measure of the value of the economy’s output adjusted for price changes (inflation or deflation).
nominal GDP: A macroeconomic measure of the value of the economy’s output that is not adjusted for inflation.
GDP deflator( inflation rate = 5% ) =
Inflation rate =
trillion
∴ Real GDP is 30 trillion.
