Asked by Sandra Vappie on May 19, 2024
Verified
Suppose the real gross domestic product (GDP) equals $100 billion this year and the nominal gross domestic product (GDP) is $200 billion.This implies that the price level has increased by _____.
A) $200 billion
B) 50 percent
C) $100 billion
D) 100 percent
E) 200 percent
Real Gross Domestic Product
A measure adjusted for inflation that shows the value of all products and services produced within an economy in a specific year.
Nominal Gross Domestic Product
The market value of all final goods and services produced within a country in a year, measured using current prices without adjustment for inflation.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, a measure of inflation or deflation.
- Absorb the essential ideas of nominal and real GDP, including the significance of selecting base years for price indices.
Verified Answer
CP
Christelle PagonisMay 22, 2024
Final Answer :
D
Explanation :
The price level increase is calculated by comparing the nominal GDP to the real GDP. If the nominal GDP is $200 billion and the real GDP is $100 billion, it means the nominal GDP is twice the real GDP, indicating prices have doubled or increased by 100 percent.
Learning Objectives
- Absorb the essential ideas of nominal and real GDP, including the significance of selecting base years for price indices.