Which of the following equations correctly links the growth rate of real GDP,the growth rate of nominal GDP,and the inflation rate?
A) Growth rate of real GDP = Growth rate of nominal GDP + Inflation rate.
B) Growth rate of real GDP + Growth rate of nominal GDP = Inflation rate.
C) Growth rate of real GDP - Growth rate of nominal GDP = Inflation rate.
D) Growth rate of real GDP = Growth rate of nominal GDP - Inflation rate.

Question

Quizplus · Accepted Answer

The growth rate of real GDP is equal to the growth rate of nominal GDP minus the inflation rate. This is because real GDP is adjusted for inflation, so the growth rate of real GDP tells us how much the economy has actually grown, while the growth rate of nominal GDP tells us how much it has grown in dollar terms. Therefore, when we subtract the inflation rate from the growth rate of nominal GDP, we get the growth rate of real GDP.

Which of the Following Equations Correctly Links the Growth Rate