Question

A general motors financial analysts 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?

Answer 1

Answer:

Real gain = 18.2%

Explanation:

We have

The GDP in 2000 as = $672 billion

While the GDP in 2010 = $1,69 billion

The interest rate for both years is given as

2000 = 6.79%

2010 = 3.71%

Also, the deflator of both years is given as

2000 = 24

2000 = 51

For us to calculate the real gain we do the following

We divide the GDP gain of each year

To calculate the real GDP gain in 2000 and 2010 by their respective deflator, which we have as;

Real GDP gain = Nominal GDP/ deflator

For the year 2000

Real GDP gain = $672b/24

Real GDP gain = $28b

For the year 2010

Real GDP gain = $1690b/51

Real GDP gain = $33.1b

To calculate the real gain, the formula is

Real gain = (Real GDP gain in 2010/Real GDP gain in 2000) - 1} ×100%

Which we have as

Real Gain = ($33.1b/$28b - 1)×100%

Real Gain = (1.182 - 1)×100%

Real Gain = 0.182×100%

Real Gain = 18.2%

As our final answer.

Answer 2

Answer:

The real gain is 18.2%

Explanation:

Given

GDP in 2000 = $672 billion

GDP in 2010 = $1,69 billion

Interest rate in 2000 = 6.79%

Interest Rate in 2010 = 3.71%

Deflator in 2000 = 24

Deflator in 2000 = 51

Real gain is calculated as follows;

Division of real GDP gain for both years - 1.

To calculate the real GDP gain in 2000 and 2010.

This is calculated by; Nominal GDP/ deflator

In 2000; real GDP gain = $672b/24

Real GDP gain = $28b

In 2010; real GDP gain = $1690b/51

Real GDP gain = $33.1b

Calculating the real gain

Real gain = Real GDP gain in 2010/Real GDP gain in 2000 - 1

Real Gain = $33.1b/$28b - 1

Real Gain = 1.182 - 1

Real Gain = 0.182

Real Gain = 18.2%

Hence, the real gain is 18.2%