Question

A country reported nominal gdp of 200 billion 2010 and 180 billion 2009. it also reported a gdp deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,A. Real output and the price level both roseB. Real output rose and the price level fellC. Real output and the price level both fellD. Real output fell and the price Level Rose

Answer 1

Answer: Option (D) is correct.

Step-by-step explanation:

Given that,

In 2009:

Nominal GDP = 180 billion

GDP deflator = 105

In 2010:

Nominal GDP = 200 billion

GDP deflator = 125

GDP deflator measure the price level of the domestically produced final goods and services in an economy. Therefore, from the given information it was observed that GDP deflator increases from 105 in 2009 to 125 in 2010.

Hence, price level increases.

Nominal GDP is at a current market prices. Here, the percentage increase in the GDP deflator is greater than the percentage increase in nominal GDP. Hence, real output falls.