Nominal vs. Real GDP

Question 1

nominal GDP

Answer 1

gross domestic product not adjusted for inflation

Question 2

real GDP

Answer 2

gross domestic product adjusted for inflation

Question 3

note

Answer 3

• adjusting GDP for inflation allows for a more accurate look at the health of an economy
• formula for real GDP:
• • inflation multiplier - 100/100 + inflation rate
• • inflation multiplier x nominal GDP - real gdp

Question 4

rate of inflation there is 5%

Answer 4

• 100/(100 + 5) = 0.952

- 1.5 8 0.952 = 1.428

Question 5

real GDP of spain is

Answer 5

$1.428 trillion dollars

Question 6

nominal GDP will always be a higher reporting than real GDP during periods of inflation. why is this?

Answer 6

real GDP focuses directly

Question 7

assume a nation’s nominal GDP is $5 trillion with an inflation rate of 5%. find its real GDP

Answer 7

4.8 trillion

Question 8

what is the difference between nominal gdp and real gdp?

Answer 8

real gdp adjusts for inflation

Question 9

why is it important to remove an increase in prices from the calculation of real gdp

Answer 9

will overestimate the gdp

Question 10

real gdp is found by removing the effects of inflation. how is this done mathematically

Answer 10

by multiplying nominal gdp by (100/(100 + inflation rate))

Question 11

assume a nation’s nominal gdp is $3.7 trillion with an inflation rate of 8%. find its real gdp

Answer 11

3.4 trillion

Question 12

when finding the real gdp, which of the following is always the case?

Answer 12

nominal gdp is always greater

Question 13

assume a nation’s nominal GDP is $1.5 trillion with an inflation rate of 5%. find its real GDP

Answer 13

1.4 trillion

Question 14

assume a nation’s nominal GDP is $4.7 trillion with an inflation rate of 3%. find its real GDP

Answer 14

4.5 trillion