Suppose that nominal GDP in 2006 was $100 billion and,in 2012,it was $260 billion.The GDP deflator in 2006 was 100 and,in 2012,it was 180.Between 2006 and 2012,real GDP rose by:
A)160 percent
B)44 percent
C)37 percent
D)12 percent
E)80 percent

Question

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 2006, real GDP is $100 billion (since the deflator is 100, making the calculation straightforward). For 2012, real GDP is $260 billion / 1.8 (since the deflator is 180, or 1.8 when used in the calculation) = $144.44 billion. The increase in real GDP from 2006 to 2012 is $144.44 billion - $100 billion = $44.44 billion, which is a 44.44 percent increase on the 2006 base of $100 billion. Rounding to the nearest whole number gives a 44 percent increase.

Suppose That Nominal GDP in 2006 Was $100 Billion And,in