Which of the following calculations will yield the correct measure of real GDP?
A) Multiply nominal GDP by the GDP deflator.
B) Divide the GDP deflator by the consumer price index.
C) Divide nominal GDP by the consumer price index.
D) Multiply nominal GDP by the consumer price index.
E) Divide nominal GDP by the GDP deflator.

Question

Quizplus · Accepted Answer

Dividing nominal GDP by the GDP deflator will give the correct measure of real GDP. The GDP deflator is a price index that measures the change in prices of all final goods and services produced in an economy, while nominal GDP is the total value of all final goods and services produced in an economy using current market prices. Dividing nominal GDP by the GDP deflator will adjust for changes in prices and give the measure of GDP in constant dollars.

Which of the Following Calculations Will Yield the Correct Measure