Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Obtain nominal GDP → Divide by GDP deflator → Multiply by 100
B
Divide nominal GDP by 100 → Multiply by GDP deflator → Obtain real GDP
C
Obtain GDP deflator → Multiply by real GDP → Calculate nominal GDP
D
Divide GDP deflator by nominal GDP → Multiply by 100 → Obtain real GDP
Understanding the Answer
Let's break down why this is correct
Answer
To calculate real GDP from nominal GDP and the GDP deflator, you first need to understand what each term means. Nominal GDP is the total economic output measured at current prices, while the GDP deflator is a measure that reflects changes in price levels. To find real GDP, you divide the nominal GDP by the GDP deflator and then multiply by 100 to adjust for inflation. For example, if your nominal GDP is $1,000 billion and the GDP deflator is 120, you would calculate real GDP as ($1,000 billion / 120) x 100, which equals about $833. 33 billion.
Detailed Explanation
To find real GDP, you start with nominal GDP. Other options are incorrect because This option mixes up the order; This option suggests using real GDP to find nominal GDP, which is backwards.
Key Concepts
Real GDP calculation
GDP deflator
Budget deficits
Topic
Calculating Real GDP and Deficits
Difficulty
hard level question
Cognitive Level
understand
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