Suppose real GDP equals $200 billion this year and nominal GDP equals $300 billion.How much has the price level increased since the base year?

Question

Quizplus · Accepted Answer

To calculate the increase in the price level, we use the GDP deflator formula:
GDP deflator = (Nominal GDP/Real GDP) x 100
GDP deflator = (300/200) x 100 = 150
The GDP deflator measures the price level relative to a base year, which has a GDP deflator of 100. Therefore, the price level has increased by 50 percent (150-100) since the base year.

Suppose Real GDP Equals $200 Billion This Year and Nominal