Question

Suppose that nominal GDP increases to $ 80,000, and the GDP deflator increases to 104 . What is real GDP? Round your answer to the nearest cent.

Answer 1

Real GDP is calculated by dividing nominal GDP by the GDP deflator divided by 100. With a nominal GDP of $80,000 and a GDP deflator of 104, the real GDP is $76,923.08 after adjustment for inflation.

Step-by-step explanation:

To determine the real GDP, we must adjust the nominal GDP by the increase in the GDP deflator. The formula to calculate real GDP is:

Real GDP = Nominal GDP / (GDP deflator / 100)

In this particular case, the nominal GDP has increased to $80,000 and the GDP deflator has increased to 104. Substituting these values into our formula gives us:

Real GDP = $80,000 / (104 / 100)

Real GDP = $80,000 / 1.04

Real GDP = $76,923.08

Real GDP = Nominal GDP / (GDP Deflator/100)

Given that the nominal GDP is $80,000 and the GDP deflator is 104, we can substitute these values into the formula:

Real GDP = $80,000 / (104/100) = $76,923.08

Therefore, the real GDP is approximately $76,923.08.