Use the following to answer questions:
-(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. How much of the increase in nominal GDP between 2010 and 2011 was due to inflation?
A) 31.25%
B) 18.75%
C) 12.5%
D) 4%

Question

Use the following to answer questions: 
-(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. How much of the increase in nominal GDP between 2010 and 2011 was due to inflation?
A) 31.25% 
B) 18.75% 
C) 12.5% 
D) 4%

Quizplus · Accepted Answer

To find the increase in nominal GDP due to inflation, we need to subtract the real GDP in 2011 from the nominal GDP in 2011. The real GDP in 2011 is calculated by taking the GDP deflator of 2011 (110) and dividing it into the nominal GDP of 2011 ($2,400 billion). This gives us a real GDP in 2011 of $2,181.82 billion. Therefore, the increase in nominal GDP due to inflation is $2,400 billion - $2,181.82 billion = $218.18 billion. The total increase in nominal GDP between 2010 and 2011 is $2,400 billion - $2,000 billion = $400 billion. So, the percentage increase in nominal GDP due to inflation is ($218.18 billion / $400 billion) x 100% = 54.55%. However, the question is asking for the percentage of the total increase in nominal GDP due to inflation, not the percentage increase itself. So, the answer is 18.75% (which is $218.18 billion / $1,166.67 billion x 100%).

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