Question

If nominal GDP rises from $2,000 to $3,000 while CPI rises from 1 to 1.2 in the same period, find the percentage change in real GDP.

Answer 1

80%

Step-by-step explanation:

Initial nominal GDP = $ 2000

Initial CPI = 1

Therefore, real GDP can be calculated by :

Real GDP =
`$\frac{\text{nominal GDP}}{CPI / 100}$`

`$=(2000)/(1/100)$`

= $ 200,000

Final nominal GDP = $ 2000

Final CPI = 1

Therefore, real GDP can be calculated by :

Real GDP =
`$\frac{\text{nominal GDP}}{CPI / 100}$`

`$=(3000)/(1.2/100)$`

= $ 250,000

Therefore, percentage change in the real GDP is :

`$= (200000)/(250000)* 100$`

= 80%