If nominal GDP increased from $4,500 billion in 2010 to $5,000 billion in 2011 and the GDP deflator increased from 100 to 105 over the same time period, what would the 2011 real GDP equal expressed in terms of 2010 dollars?
A)$4,285 billion
B)$4,500 billion
C)$4,725 billion
D)$4,762 billion

Question

If nominal GDP increased from $4,500 billion in 2010 to $5,000 billion in 2011 and the GDP deflator increased from 100 to 105 over the same time period, what would the 2011 real GDP equal expressed in terms of 2010 dollars?
A)​$4,285 billion
B)​$4,500 billion
C)​$4,725 billion
D)​$4,762 billion

Quizplus · Accepted Answer

Real GDP is calculated by dividing the nominal GDP by the GDP deflator (then multiplying by 100 to adjust for the base year). For 2011, this is $5,000 billion / 105 * 100 = $4,761.90 billion, which rounds to $4,762 billion.

If Nominal GDP Increased from $4,500 Billion in 2010 to $5,000