Question

Refer to the following table, and answer the questions that follow:

Year	Nominal GDP	Real GDP	GDP deflator
2012	$210,000	??	100.0
2013	??	$215,000	110.0
2014	$260,000	$220,000	??

(a) Compute the nominal GDP in 2013.

(b) Compute the price level in 2014.

(c) Calculate the inflation rate between 2012 and 2013.

Answer 1

(a) Nominal GDP = (GDP deflator * real GDP) / 100

Nominal GDP in 2013 = (110 * $215,000) / 100

                                    = $236,500

(b) Price level = (nominal GDP / real GDP) * 100

= ($260,000 / $220,000) * 100

= $118.18

(c) Inflation rate between 2012 and 2013 = (110 – 100) / 100

                                                                 = 0.1%