Question

Suppose Miguel wants to know the value of real gross domestic product (GDP) for 2011 in terms of the base year 1984 dollars. In 1984 nominal GDP was $10 billion. In 2011 nominal GDP was $15 billion and the price deflator was 200. Real GDP in 1984 dollars would be equal to which of the following?

$5 billion

$5 billion
A

$7.5 billion

$7.5 billion
B

$10 billion

$10 billion
C

$20 billion

$20 billion
D

$30 billion

$30 billion
E


































































































Submit

Answer 1

Е

Step-by-step explanation:

To calculate real GDP in terms of base year 1984 dollars, we need to adjust for inflation by dividing nominal GDP by the price deflator.

Real GDP = Nominal GDP / Price Deflator

In this case, we know that:

Nominal GDP in 2011 is $15 billion

The price deflator in 2011 is 200

So:

Real GDP in 2011 = $15 billion / 200 = $75 billion

We know the nominal GDP in 1984 was $10 billion, but we need to adjust the Real GDP 2011 to 1984 dollars, so we multiply $75 billion by 10/15,

$75 billion * 10/15 = $50 billion

So the value of real GDP for 2011 in terms of the base year 1984 dollars would be $50 billion,

The answer is E. $50 billion.

If I helped you, could you please make my answer as best?