Question

. In 2018, the nominal GDP in Brownsonia was $315 billion and the inflation rate was 5%. Calculate the real GDP in Brownsonia for 2018. If the real GDP for 2017 was $273 billion, what was the approximate growth rate in real GDP during 2018?

Answer 1

GDP is the total sum of the wealth produced in a country over a given period of time, usually one year. Nominal GDP is GDP at current prices, while nominal GDP is deflated GDP, ie, discounted inflation. Thus, if the inflation rate is 5% = 0.05, we have to use the formula for the real GDP calculation:

Real GDP 2018 = Nominal GDP / 1+ inflation rate

Real GDP = 315 / 1.05 = $ 300 (in billions).

To calculate the GDP growth rate between 2017 and 2018, just narrow the difference between real GDP for both years and divide by the value of real GDP for 2017. The result must be multiplied by 100 to find the percentage value.

GDP growth rate = {(300 - 273) / 273} * 100 = 9.89%