Etruria's nominal GDP rose from $420 billion in 2013 to $450 billion in 2016.During the same period,its inflation rate was 5 percent.By what percentage did its real GDP increase?

Question

Quizplus · Accepted Answer

To calculate the real GDP, we need to adjust the nominal GDP for inflation using the following formula: 
Real GDP = Nominal GDP / (1 + inflation rate)
Real GDP in 2013 = 420 / (1+0.05) = 400
Real GDP in 2016 = 450 / (1+0.05) = 428.57
So, the percentage increase in real GDP = ((428.57-400) / 400) x 100 ≈ 7.14%
Therefore, the closest answer is B) 2.14% (since it's the only option that's approximately 2-3% higher than the actual increase in real GDP).

Etruria's Nominal GDP Rose from $420 Billion in 2013 to $450