The table below shows the price indexes and the nominal gross domestic product (GDP)for an economy from 2001 to 2005.The real GDP _____ between 2001 and 2002.
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Table 6.3
?
?
$$\begin{array} { c c c }
\text { Year } & \text { Price Index } & \text { Nominal GDP } \
\hline 2001 & 100 & \$ 95 \text { billion } \
2002 & 105 & \$ 110 \text { billion } \
2003 & 110 & \$ 120 \text { billion } \
2004 & 120 & \$ 125 \text { billion } \
2005 & 132 & \$ 137.5 \text { billion }
\end{array}$$
A)increased by slightly less than $10 billion
B)decreased by slightly more than $5 billion
C)remained constant
D)increased by only about $1 billion
E)increased more than $20 billion

Question

The table below shows the price indexes and the nominal gross domestic product (GDP)for an economy from 2001 to 2005.The real GDP _____ between 2001 and 2002.
?
Table 6.3
?
?
$$\begin{array} { c c c } 
\text { Year } & \text { Price Index } & \text { Nominal GDP } \
\hline 2001 & 100 & \$ 95 \text { billion } \
2002 & 105 & \$ 110 \text { billion } \
2003 & 110 & \$ 120 \text { billion } \
2004 & 120 & \$ 125 \text { billion } \
2005 & 132 & \$ 137.5 \text { billion }
\end{array}$$
A)increased by slightly less than $10 billion
B)decreased by slightly more than $5 billion
C)remained constant
D)increased by only about $1 billion
E)increased more than $20 billion

Quizplus · Accepted Answer

To calculate real GDP, use the formula: Real GDP = Nominal GDP / (Price Index / 100). For 2001, Real GDP = $95 billion / (100 / 100) = $95 billion. For 2002, Real GDP = $110 billion / (105 / 100) = $104.76 billion. The real GDP increased from $95 billion to $104.76 billion, which is an increase of slightly less than $10 billion.

The Table Below Shows the Price Indexes and the Nominal