In order to convert nominal GDP to real GDP,we must divide
A)real GDP by the price index
B)nominal GDP by the price index
C)the price index by nominal GDP
D)the price index by real GDP
E)nominal GDP by real GDP

Question

Quizplus · Accepted Answer

Nominal GDP is the value of all final goods and services produced in a particular year, measured in current prices. Real GDP, on the other hand, is the value of all final goods and services produced in a particular year, but measured in constant prices. To convert nominal GDP to real GDP, we need to use a price index (such as the consumer price index or the GDP deflator) to adjust for inflation. Dividing nominal GDP by the price index gives us the real GDP. Therefore, the best choice is B, which is "nominal GDP by the price index".

In Order to Convert Nominal GDP to Real GDP,we Must