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Question & Answer1
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Explore TopicChoose the Best Answer
A
Real GDP is $160 billion, indicating economic growth.
B
Real GDP is $250 billion, suggesting the country is in a budget surplus.
C
Real GDP is $160 billion, suggesting potential economic stagnation.
D
Real GDP cannot be calculated without additional data.
Understanding the Answer
Let's break down why this is correct
Answer
To find the real GDP, we need to adjust the nominal GDP for inflation using the GDP deflator. The formula is real GDP = nominal GDP divided by the GDP deflator, then multiplied by 100. In this case, we take $200 billion and divide it by 125, which gives us a real GDP of $160 billion. This means that while the nominal GDP appears high, the actual value of goods and services produced in the country is lower when adjusted for inflation. A real GDP of $160 billion suggests that the economy may not be growing as strongly as it seems, which could indicate potential challenges for the country's economic health.
Detailed Explanation
To find real GDP, we divide nominal GDP by the GDP deflator. Other options are incorrect because This answer suggests that real GDP is higher than nominal GDP, which is not possible; This option implies that $160 billion means the economy is not growing.
Key Concepts
Real GDP Calculation
Nominal GDP and GDP Deflator
Economic Health Indicators
Topic
Calculating Real GDP and Deficits
Difficulty
easy level question
Cognitive Level
understand
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