Question

. Suppose Nominal GDP in 2017 is $18 trillion, and nominal GDP in 2016 is $17.6 trillion, and the GDP deflator in 2016 is 99 (=.99), and 2017 is the base year. The rate of growth in real GDP in 2016 is about: a. -1.2% c. 1.2% b. -1.1% d. .2%

Answer 1

We are given the base year as 2017.

GDP deflator in 2016 is 0.99 or 99

Real GDP in 2016= nominal GDP in 2016/ gdp deflator = 17.6 trillion/0.99 = 17.78 trillion

Since GDP deflator in base year which is 2017 is 100, the real and nominal gdp would be the same

Rate of growth in real GDP in 2016 = Real GDP in 2016/ real GDP in base year(2017)- 1 =( 17.6/18)-1 = 0.987-1

Rate of growth in real GDP in 2016 = (-)0.012 or (-)1.2%(approx)

SO answer is option A)

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