If real gross domestic product (GDP)in a particular year is $5,000 trillion and nominal gross domestic product (GDP)in that same year is $4,000 trillion,then the:
A)consumer price index (CPI)is 125.
B)economic activity has decreased by 20 percent.
C)GDP price index is 125.
D)GDP price index is 80.
E)economy has grown by 20 percent.

Question

Quizplus · Accepted Answer

The GDP price index is calculated by dividing nominal GDP by real GDP and multiplying by 100. In this case, (4,000/5,000) x 100 = 80, which means that the GDP price index is 80. Option A is incorrect because the CPI is not given and cannot be calculated with the given information. Option B is incorrect because there is no indication of a percent change in GDP or economic activity. Option E is incorrect because the difference between real GDP and nominal GDP does not represent a growth rate, but rather a difference in price levels.

If Real Gross Domestic Product (GDP)in a Particular Year Is