Suppose nominal GDP in year 1 was $100 billion and in year 2 it was $260 billion. The general price index in year 1 was 100 and in year 2 it was 180. Real GDP in year 2 was
A) $160 billion.
B) $144 billion.
C) $44 billion.
D) $80 billion.

Question

Quizplus · Accepted Answer

To calculate real GDP, we need to adjust for inflation. We use the general price index to do this.

Real GDP in year 2 = Nominal GDP in year 2 / Price index in year 2 * 100 
Real GDP in year 2 = $260 billion / 180 * 100 
Real GDP in year 2 = $144 billion

Suppose Nominal GDP in Year 1 Was $100 Billion and in Year