A country reported a nominal GDP of $115 billion in 2020 and $125 billion in 2019 and reported a GDP deflator of 85 in 2020 and 100 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 $125 billion, and for 2020, it's approximately $135.29 billion ($115 billion / 0.85). This indicates that real output rose from 2019 to 2020. The GDP deflator decreased from 100 to 85, indicating that prices fell.

A Country Reported a Nominal GDP of $115 Billion in 2020