Suppose a nation's nominal GDP is $972 billion and the general price index is 90. To make this year?s GDP comparable with an earlier base year?s GDP, then this year?s GDP must be
A) deﬂated to $678 billion.
B) deﬂated to $896 billion.
C) inﬂated to $1,080 billion.
D) deﬂated to $1,080 billion.

Question

Quizplus · Accepted Answer

To adjust the nominal GDP to a real GDP comparable with a base year, you use the formula: Real GDP = Nominal GDP / (Price Index/100). Plugging in the given numbers: $972 billion / (90/100) = $1,080 billion. This means the GDP needs to be adjusted upwards (inflated) to account for the difference in price levels between the two years, making option C correct.

Suppose a Nation's Nominal GDP Is $972 Billion and the General