Question

I need a clear explanation to this question please give me all the steps explaining everything

ssume that between 1990 and 2000, nominal GDP increased from $3.00 triillion to $5.00 triillion, and the index of prices increased from 120 to 150. Which of the following expresses GDP for 1990 in terms of 2000 prices?

Select one:

a. $4.00 trillion

b. $4.50 trillion

c. $6.25 trillion

d. $3.75 trillion

e. $2.40 trillion

Answer 1

GDP of 1990 in terms of Prices of 2000 will be

$3.75 trillion.

(Nominal GDP of Current year × price index of base year ) / Price index of current year

Nominal GDP of current year 1990 is $ 3 trillion

Price index of current year 1990 is 120

Price index of base year 2000 is 150

1990 Current year as Real GDP to be calculated for this year

2000 base year because it will used as a comparison to find out GDP in 1990