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

Answer:

$500

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 = $\frac{NominalGDP}{RealGDP}$ x 100

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

170 = $\frac{850}{RealGDP}$ x 100

Real GDP = $500