The table below shows data for Japan.

Assuming the rate of velocity change is constant, real GDP
A) grew by - 3.4 percent in 2006.
B) grew by 2.8 percent in 2006.
C) grew by 4.4 percent in 2005.
D) grew by 5.0 percent in 2005.

Question

The table below shows data for Japan.

Assuming the rate of velocity change is constant, real GDP
A) grew by - 3.4 percent in 2006. 
B) grew by 2.8 percent in 2006. 
C) grew by 4.4 percent in 2005. 
D) grew by 5.0 percent in 2005.

Quizplus · Accepted Answer

To calculate the real GDP growth rate, we need to calculate the percentage change in nominal GDP adjusted for inflation. Using the data given in the table, we can calculate the real GDP for 2005 and 2006 by dividing the nominal GDP by the GDP deflator (which is given as 100 in both years).

Real GDP 2005 = Nominal GDP 2005 / GDP deflator 2005 = 440.5 / 100 = 4.405 trillion yen
Real GDP 2006 = Nominal GDP 2006 / GDP deflator 2006 = 454.4 / 100 = 4.544 trillion yen

The percentage change in real GDP from 2005 to 2006 can be calculated as follows:
(Real GDP 2006 - Real GDP 2005) / Real GDP 2005 x 100%
= (4.544 - 4.405) / 4.405 x 100%
= 3.15%

Therefore, the correct answer is B, real GDP grew by 2.8 percent in 2006.

The Table Below Shows Data for Japan