Question

If the current price of a market basket of goods is $850, the current year GDP deflator is 170, and the base year price index is 100, what is the price of the basket in real terms

Answer 1

$500

Step-by-step explanation:

DATA

The current price of the market basket of goods = $850

Current year GDP deflator = 170

In order to find the GDP in real terms, we should amend the GDP deflates formula

Formula: GDP deflator =
`(NominalGDP)/(RealGDP)` x 100

Lets put the values and amend the formula in order to find real GDP

170 =
`(850)/(RealGDP)` x 100

Real GDP = $500