A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009.It also reported a GDP deflator of 125 in 2010 and 120 in 2009.Between 2009 and 2010,

Question

Quizplus · Accepted Answer

To calculate real GDP, we need to use the formula:

Real GDP = Nominal GDP / GDP Deflator

Real GDP in 2009 = $75 billion / 120 = $62.5 billion

Real GDP in 2010 = $100 billion / 125 = $80 billion

Therefore, real output increased between 2009 and 2010.

The GDP deflator measures the level of prices in an economy, so an increase in the GDP deflator indicates that prices have risen. As the GDP deflator increased from 120 to 125 between 2009 and 2010, we can conclude that the price level also rose.

Thus, the correct answer is A) real output and the price level both rose.

A Country Reported Nominal GDP of $100 Billion in 2010