Assume that, in the base year (2011), a country's nominal GDP is $10,000 billion. The country has had 5% inflation each year since 2006. Real GDP of 2011 is equal to:
A) $10,500 billion.
B) $11,025 billion.
C) $10,000 billion.
D) $9,500 billion.

Question

Quizplus · Accepted Answer

Real GDP is the nominal GDP adjusted for inflation, so we need to use the base year (2011) as a reference point. Since the question only provides the inflation rate from 2006 onwards, we cannot accurately adjust the nominal GDP to real GDP in 2011. Therefore, we must assume that the nominal GDP in 2011 is also the real GDP in 2011, given that it is already in the base year.

Assume That, in the Base Year (2011), a Country's Nominal