If nominal GDP rose by 10 percent and the price index increased from 100 to 105 in a given year, real GDP:
A)rose by 15 percent.
B)rose by roughly 9.5 percent.
C)rose by 5 percent.
D)fell by 5 percent.

Question

If nominal GDP rose by 10 percent and the price index increased from 100 to 105 in a given year, real GDP:
A)​rose by 15 percent.
B)​rose by roughly 9.5 percent.
C)​rose by 5 percent.
D)​fell by 5 percent.

Quizplus · Accepted Answer

Real GDP is calculated by adjusting nominal GDP for changes in the price level. If the price index increased from 100 to 105, it means prices rose by 5%. Since nominal GDP rose by 10%, the real GDP increase is approximately 10% - 5% = 5%.

If Nominal GDP Rose by 10 Percent and the Price