Table 6.4
$$\begin{array}{l}
\text { Table } 6.4\
\begin{array} { c c c }
\text { Year } & \text { Price Index } & \text { Nominal GDP } \
\hline 2001 & 100 & \$ 95 \text { billion } \
2002 & 105 & \$ 110 \text { billion } \
2003 & 110 & \$ 120 \text { billion } \
2004 & 120 & \$ 125 \text { billion } \
2005 & 132 & \$ 137.5 \text { billion }
\end{array}
\end{array}$$
-Refer to Table 6.4, which 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.

Question

Table 6.4
 $$\begin{array}{l}
\text { Table } 6.4\
\begin{array} { c c c } 
\text { Year } & \text { Price Index } & \text { Nominal GDP } \
\hline 2001 & 100 & \$ 95 \text { billion } \
2002 & 105 & \$ 110 \text { billion } \
2003 & 110 & \$ 120 \text { billion } \
2004 & 120 & \$ 125 \text { billion } \
2005 & 132 & \$ 137.5 \text { billion }
\end{array}
\end{array}$$
-Refer to Table 6.4, which 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.

Quizplus · Accepted Answer

To calculate the real GDP, we need to use the GDP deflator, which is the ratio of nominal GDP to real GDP, multiplied by 100. Real GDP can be calculated by dividing nominal GDP by the price index and then multiplying by 100.

Real GDP in 2001 = (Nominal GDP in 2001/Price Index in 2001) x 100 = ($95 billion/100) x 100 = $95 billion 
Real GDP in 2002 = (Nominal GDP in 2002/Price Index in 2002) x 100 = ($110 billion/105) x 100 = $104.76 billion

Therefore, the change in real GDP between 2001 and 2002 is: 
Change in real GDP = Real GDP in 2002 - Real GDP in 2001 = $104.76 billion - $95 billion 
= $9.76 billion

Since the change in real GDP is slightly less than $10 billion, the correct answer is A) increased by slightly less than $10 billion.

Table 64 -Refer to Table 6