Question

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain? Group of answer choices
a) 18.34%
b) 38.58%
c) 151.48%
d) 70.61%

Answer 1

Answer:

a) 18.34%

Explanation:

Real gain = [Real GDP year 2010]/[Real GDP year 2000]

                = [nominal GDP ]/[nominal GDP]

Real GDP gain(2000) = [nominal GDP ]/[nominal GDP]

                                    = $672billion/24

                                    = 28

Real GDP gain(2010) = [nominal GDP ]/[nominal GDP]

                                    = $1,690 billion/51

                                    = 33.14

Real gain = Real GDP gain(2010)/Real GDP gain(2000) - 1

                = 33.14/28 - 1

                = 0.1834

Therefore, The  real gain is 18.34%