A country reported nominal GDP of $200 billion in 2020 and $180 billion in 2019 and reported a GDP deflator of 125 in 2020 and 105 in 2019. What happened to real output and prices from 2019 to 2020?

Question

Quizplus · Accepted Answer

Real GDP is calculated by dividing the nominal GDP by the GDP deflator and then multiplying by 100. For 2019, the real GDP is $ \frac{180}{105} \times 100 = 171.43 $ billion, and for 2020, it is $ \frac{200}{125} \times 100 = 160 $ billion. This shows that real output fell. The GDP deflator increased from 105 to 125, indicating that prices rose.

A Country Reported Nominal GDP of $200 Billion in 2020