Suppose that since the base year, all prices have increased by 100 percent. This year's nominal gross domestic product is $8,000 billion. Therefore, the real gross domestic product is

Question

Quizplus · Accepted Answer

If all prices have increased by 100 percent since the base year, it means prices have doubled. Therefore, to find the real GDP, which is measured in base year prices, you divide the nominal GDP by the inflation factor (in this case, 2). $8,000 billion / 2 = $4,000 billion.

Suppose That Since the Base Year, All Prices Have Increased