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Iteru [2.4K]
4 years ago
13

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?
Business
1 answer:
valentina_108 [34]4 years ago
5 0

Answer:

The answer is: the real gain in real GDP between 2010 and 2000 is 18.34%

Explanation:

First we have to determine the real GDP using the GDP deflator.

GDP deflator = (nominal GDP / real GDP) x 100

For year 2000:

24 = ($672 billion / real GDP ) x 100

2,400 = $672 billion / real GDP

real GDP = $0.28 billion

For year 2010:

51 = ($1,690 billion / real GDP ) x 100

5,100 = $1,690 billion / real GDP

real GDP = $0.331 billion

To calculate the real gain between real GDP from year 2000 to year 2010, we divide real GDP 2010 over real GDP 2000 and subtract 1:

($0.331 billion / $0.28 billion) -1 = 0.1834 x 100% = 18.34%

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Explanation:

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We know that

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For Option B:

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However, Based on IRR, Option A should be chosen as it contains higher IRR and a higher IRR represent a higher profit percentage

 

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