Question

In year 1, nominal GDP for the United States was $2,250 billion and in year 2 it was $2,508 billion. The GDP deflator was 72 in year 1 and 79 in year 2. Between year 1 and year 2, real GDP rose by:_______

a. 11.4 percent.
b. 2.4 percent.
c. 1.6 percent.
d. 9.7 percent.

Answer 1

c. 1.6 percent.

Step-by-step explanation:

GDP Deflator = Nominal GDP / Real GDP * 100

year 1

Real GDP = $2250 billion/72*100

= $ 3125.

year 2

Real GDP = $2508 billion/79*100

= $3175

Real GDP rose by = Real GDP (2nd year) - Real GDP (1st year)

= $3175 - $3125

= $ 50

% increase = $50/$2,250*100

= 1.6%

Therefore, The Real GDP rose by 1.6%.