A country reported nominal GDP of $200 billion in 2007 and $180 billion in 2006, and reported a GDP deflator of 125 in 2007 and 105 in 2006. What happened to real output and prices from 2006 to 2007?

Question

Quizplus · Accepted Answer

Real output fell because the nominal GDP increase was less than the increase in the GDP deflator, indicating a decrease in real GDP. Prices rose as indicated by the increase in the GDP deflator from 105 to 125.

A Country Reported Nominal GDP of $200 Billion in 2007