Table 12-19
$\begin{array}{|l|c|r|}
\hline & \mathbf{2 0 1 7} & {\mathbf{2 0 1 8}} \
\hline \text { Nominal GDP } & \$ 10,000 & \$ 12,000 \
\hline \text { Real GDP } & 9,500 & 10,500 \
\hline
\end{array}$
-Refer to Table 12-19.Given the information above,calculate the rate of increase in the price level from 2017 to 2018.

Question

Table 12-19
 $\begin{array}{|l|c|r|}
\hline & \mathbf{2 0 1 7} & {\mathbf{2 0 1 8}} \
\hline \text { Nominal GDP } & \$ 10,000 & \$ 12,000 \
\hline \text { Real GDP } & 9,500 & 10,500 \
\hline
\end{array}$
-Refer to Table 12-19.Given the information above,calculate the rate of increase in the price level from 2017 to 2018.

Quizplus · Accepted Answer

According to the GDP formula, Nominal GDP = Price Level x Real GDP.
Therefore, Price Level in 2017 = Nominal GDP in 2017 / Real GDP in 2017 = $10,000 / 9,500 = 1.0526
And Price level in 2018 = Nominal GDP in 2018 / Real GDP in 2018 = $12,000 / 10,500 = 1.1429
The rate of increase in the price level from 2017 to 2018 can be calculated as (New Price Level - Old Price Level) / Old Price Level x 100%
[(1.1429 - 1.0526) / 1.0526] x 100% = 8.6%
Therefore, the correct answer is A) 8.6%.

Table 12-19 -Refer to Table 12-19