Question

The GDP deflator in the United States in 2003 was 87​, and real GDP in 2003 ​(in 2009​ dollars) was ​$13.3 trillion.

The GDP deflator in the United States in 2006 was 95​, and real GDP in 2006 ​(in 2009​ dollars) was ​$14.6 trillion.

What was the percentage change in production between 2003 and 2006​, and by what percentage did the price level change between 2003 and 2006​?

Answer 1

As, Real GDP indicates Production. So Production in 2003 is $13.3 trillion and Production in 2006 is $14.6 trillion

% change in X = ((final X - initial X) / Initial X)*100

Using above details we get:

Percentage change in production between 2003 and 2006​   

= ((Real GDP in 2006 - Real GDP in 2003) / Real GDP in 2003)*100

= ((14.6 trillion - 13.3 trillion)/13.3 trillion)*100

= 9.77%

Hence, percentage change in production between 2003 and 2006 is 9.77%

As, GDP Deflator indicates Price level. So Price level in 2003 is 87 and Price level in 2006 is 95

% change in X = ((final X - initial X) / Initial X)*100

Using above details we get:

Percentage change in production between 2003 and 2006​   

= ((Price level in 2006 - Price level in 2003) / Price level in 2003)*100

= ((95 - 87)/87)*100

= 9.20%

Hence, Percentage change in price level between 2003 and 2006 is 9.20%