Table 5-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.

-Refer to Table 5-3. What is the GDP deflator and the inflation rate for 1931?

Question

Table 5-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.
 
-Refer to Table 5-3. What is the GDP deflator and the inflation rate for 1931?

Quizplus · Accepted Answer

To calculate the GDP deflator, we use the formula:

GDP deflator = (Real GDP / Nominal GDP) x 100

For 1931, Real GDP is given as $78.3 billion and Nominal GDP is given as $93.2 billion.

Therefore, GDP deflator = (78.3/93.2) x 100 = 83.93

To calculate the inflation rate, we use the formula:

Inflation rate = [(GDP deflator in second year - GDP deflator in first year) / GDP deflator in first year] x 100

For 1931, the GDP deflator in the previous year (1930) was 93.3.

Therefore,

Inflation rate = [(83.93 - 93.3) / 93.3] x 100 = -10.3%

Hence, the answer is B.

Table 5-4 the Table Below Reports Nominal and Real GDP for the for the U.S