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 2002 and 2003.
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)decreased by slightly more than $5 billion
B)increased by slightly more than $4 billion
C)remained constant
D)increased by only about $1 billion
E)decreased by $6 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 2002 and 2003.
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)decreased by slightly more than $5 billion
B)increased by slightly more than $4 billion
C)remained constant
D)increased by only about $1 billion
E)decreased by $6 billion

Quizplus · Accepted Answer

To calculate the real GDP, we use the formula: Real GDP = Nominal GDP / (Price Index / 100). For 2002, Real GDP = $110 billion / (105 / 100) = $104.76 billion. For 2003, Real GDP = $120 billion / (110 / 100) = $109.09 billion. The difference between 2003 and 2002 is $109.09 billion - $104.76 billion = $4.33 billion, indicating an increase by slightly more than $4 billion.

The Table Below Shows the Price Indexes and the Nominal