Question

The 2005 GDP was $12.456 trillion and the GDP in 2006 was $13.247 trillion.

This means that the economy grew by 13.247 – 12.456 or $791 billion in ________ terms..

Answer 1

This means that the economy grew by $791 billion in nominal terms

Step-by-step explanation:

Nominal growth can be determined by only determining the difference in the GDP in 2006 and the GDP in 2005 only but the economic growth in real terms takes account of also the inflation.

In this case, the economic growth in nominal terms can be expressed as;

G=F-I

where;

G=economic growth in nominal terms

F=final GDP in 2006

I=initial GDP in 2005

This can also be written as;

Economic growth in nominal terms=GDP in 2006-GDP in 2005

In our case;

G=unknown

F=$13.247 trillion

I=$12.456 trillion

replacing;

G=13.247-12.456=0.791 trillion

0.791 trillion=$791 billion

This means the economy grew by $791 billion in nominal terms