Question

Suppose this year’s nominal GDP is $1,000 million and price level is 100. If nominal GDP increases by 2 percent and the price level goes up by 3 percent next year, calculate next year’s nominal GDP, price level, and real GDP.

Answer #1

Answer

Nominal GDP Nominal year is 1000 million $

**Nominal GDP next year = 1000 million + 2% of 1000
million
= 1020 million $**

Price level this year is 100

=

= (1020 million / 103 ) * 100

Nominal GDP is 1020 million $

Price level is 103

Real GDP is 990.29 million $

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