A country reported a nominal GDP of $115 billion in 2015 and $125 billion in 2014 and reported a GDP deflator of 85 in 2015 and 100 in 2014.What happened to real output and prices from 2014 to 2015?
A) Real output and prices both rose.
B) Real output fell and prices rose.
C) Real output rose and prices fell.
D) Real output and prices both fell.

Question

Quizplus · Accepted Answer

The nominal GDP increased from 2014 to 2015, but the GDP deflator decreased, indicating that prices fell. To find real GDP, divide nominal GDP by the GDP deflator (in hundredths). Real GDP in 2015 is higher than in 2014, indicating real output rose.

A Country Reported a Nominal GDP of $115 Billion in 2015