Question

Suppose you have the following information: 2017 is the Base Year Nominal GDP in 2017 = $17 Trillion Nominal GDP in 2018 = $18.5 Trillion The GDP Deflator in 2018 is 1.045 What is the 2018: a) nominal GDP growth rate; b) real GDP growth rate; and c) inflation rate?

Answer 1

base year = 2017

Nominal GDP in 2017 = $17 trillion

Nominal GDP in 2018 = $18.5 trillion

GDP Deflator in 2018 = 1.045

a) Nominal GDP growth rate = 18.5-17/17*100 = 8.82%

b) Real GDP in 2017 = same as nominal GDP = 17 trillion

Real GDP in 2018 = Nominal GDP/Deflator =18.5/1.045 = 17.7 trillion

Real GDP growth rate = 17.7-17/17*100 = 4.11%

c)GDP Deflator in base year = 1

Inflation = Current year Deflator-Base year Deflator/Base year Deflator*100

Inflation rate = 1.045-1/1*100

=.045/1*100

=4.5%