Question

In year 1, nominal GDP for the United States was $2,250 billion and in year 2 it was $2,508 billion. The GDP deflator was 72 in year 1 and 79 in year 2. Between year 1 and year 2, real GDP rose by:

Answer 1

Answer:

1.6%

Step-by-step explanation:

The real GDP is given by the nominal GDP divided by the GDP deflator, the real GDP for year 1 and year 2, respectively, were:

$GDP_1=\frac{2250}{0.72}\\GDP_1=\ 3,125\ billion\\\\GDP_2=\frac{2,508}{0.79}\\GDP_2=\ 3,174.68\ billion$

The percentage change in GDP is:

$P=\frac{3,174.68-3,125}{3,125}\\ P=0.016=1.6\%$

Between year 1 and year 2, real GDP rose by 1.6%.