Final answer:
To calculate real GDP using the GDP deflator, divide the nominal GDP by the deflator adjusted to decimal form and multiply by 100. For 1960, with a nominal GDP of $543.3 billion and a deflator of 19.0, the real GDP is $2,859.5 billion.
Step-by-step explanation:
To calculate the real GDP from nominal GDP using the GDP deflator, one must apply the following formula:
Real GDP = Nominal GDP / (GDP Deflator / 100)
Step 1: Look at the given data for 1960, where nominal GDP is $543.3 billion, and the GDP deflator is 19.0.
Step 2: Adjust the GDP deflator by dividing by 100 to convert it into a decimal. Here, 19.0 divided by 100 equals 0.19.
Step 3: Next, divide the nominal GDP by the adjusted deflator to calculate the real GDP. Applying the formula yields $543.3 billion / 0.19, which equals $2,859.5 billion.
This calculation helps in making accurate comparisons over time by isolating the effect of price changes from the consideration of the physical volume of goods and services produced.