Suppose that GDP in current dollars was $360 billion in 2006 and $450 billion in 2012.The GDP deflator was 120 in 2006 and 125 in 2012.It can be concluded that,between 2006 and 2012,real GDP:
A)increased by about $5 billion
B)decreased by about $32 billion
C)increased by about $100 billion
D)increased by about $117 billion
E)increased by about $60 billion

Question

Quizplus · Accepted Answer

To find the real GDP, we adjust the nominal GDP using the GDP deflator. Real GDP in 2006 is $360 billion / 1.20 = $300 billion. Real GDP in 2012 is $450 billion / 1.25 = $360 billion. The increase in real GDP is $360 billion - $300 billion = $60 billion.

Suppose That GDP in Current Dollars Was $360 Billion in 2006