From the base year (1990)to the next year (1991)the price index increases from 100 to 102.5.If nominal GDP is $2,800 in 1991,then the real GDP in 1991 is
A)$2,800 multiplied by 102.5 and divided by 100.
B)$2,800.
C)$2,800 divided by 102.5 and multiplied by 100.
D)$2,800 divided by 102.5.

Question

Quizplus · Accepted Answer

Real GDP is calculated by adjusting the nominal GDP for inflation to reflect the true value of goods and services produced. This is done by dividing the nominal GDP by the price index (in its decimal form) for the year in question and then multiplying by the base year's price index (100 in this case). Thus, the correct calculation is $2,800 divided by 102.5 and multiplied by 100.

From the Base Year (1990)to the Next Year (1991)the Price