Question

Use the table to answer the following questions.

Year	Gross Domestic Product units	Total
2019	GDP in 2019 dollars	$21.43 trillion
2019	GDP in 1980 dollars	$6.91 trillion
2000	GDP in 2000 dollars	$10.28 trillion
2000	GDP in 1980 dollars	$4.92 trillion
1980	GDP in 1980 dollars	$2.86 trillion

What is real GDP for the year 1980?

	a.	$21.43 trillion
	b.	$6.91 trillion
	c.	$4.92 - $2.86 trillion
	d.	$2.86 trillion

How much did nominal GDP grow between the years 1980 and 2000?

a.

b.

c.

d.

Using the GDP deflator, what was the inflation rate between 1980 and 2000?

a.

b.

c.

d.

Answer 1

(a) Real GDP for the year 1980 = $2.86 trillion. For the base year, nominal GDP as well as real GDP are same.

(b) Nonimal GDP in 1980 = $2.86 trillion and nominal GDP in 2000 = $10.28 trillion.

Hence, growth in nominal GDP from 1980 to 2000 = (10.28/2.86)-1 = 259.4%.

The annual growth rate = (10.28/2.68)^(1/20)-1=6.6% (upto 1 decimal point)

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(c) [GDP deflator]2000 = [(nominal GDP * 100)/real GDP]2000 = (10.28 * 100) /4.92 = 208.9 (upto 1 decimal point).

On the other hand base year [GDP deflator]1980 = 100.

Hence, GDP deflator increases 208.9 - 100 = 108.9 or 108.9%.

On the other hand annual increase in GDP deflator = inflation = (208.9/100)^(1/20)-1 = 3.8%