Suppose the real gross domestic product (GDP) equals $200 billion this year and the nominal gross domestic product (GDP) equals $300 billion. This implies that the price level has increased by _____ compared to the base year.

Question

Quizplus · Accepted Answer

To calculate the percentage change in price level, we can use the GDP deflator formula:

GDP deflator = (Nominal GDP/Real GDP) x 100

Plugging in the values given:

GDP deflator = (300/200) x 100 = 150

This means that the price level has increased by 50% (from 100 in the base year to 150 in the current year). Therefore, the correct answer is C) 50%.

Suppose the Real Gross Domestic Product (GDP) Equals $200 Billion