Question

Country X's Nominal GDP in 2020 is 2000 (million dollars), and in 2021 is 2050 . The corresponding GDP deflator for 2020 is 200 and for 2021 is 240 . Country X's population grew from 10 million in 2020 to 11 million in 2021. 17. What is the growth in Nominal GDP in 2021 ?

A. 1%
B. 2.5%
C. 10%
D. 50%

Answer 1

The growth in Nominal GDP for Country X from 2020 to 2021 is 2.5%, which is option B.

Step-by-step explanation:

The student is asking about the growth in Nominal GDP from 2020 to 2021 for Country X. To calculate the growth, we compare the Nominal GDP of both years.

The Nominal GDP in 2020 is $2000 million, and in 2021 it is $2050 million.

The growth in Nominal GDP is found by subtracting the earlier year's GDP from the later year's GDP and then dividing by the earlier year’s GDP.

This gives us ($2050 - $2000) / $2000 = 0.025 or a 2.5% increase, which corresponds to option B.

It's important to consider that Nominal GDP reflects not just the production levels but also the price levels of goods and services due to inflation, which is why the GDP deflator is used to distinguish real growth from inflation effects. However, the question specifically asks about Nominal GDP growth, not real GDP growth, which would require adjusting for price level changes using the GDP deflator.