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If inflation is 2% and nominal GDP grew by 4% then during the same period real GDP changes by how much?

2 Answers

4 votes

Answer:B. 2%

Step-by-step explanation:

User Muqito
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4 votes

The answer is 2%.

In order to find the real GDP figure, the Fisher equation needs to be applied as follows:

r= i - π

where,

  • r is the real interest rate
  • i stands for the norminal interest rate
  • π stands for the inflation rate

Therefore:

r= i - π = 4% - 2%= 2%

User Nakeya
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5.1k points