If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion,then the
A)CPI is 125
B)economic activity has decreased 20 percent
C)GDP price index is 125
D)GDP price index is 80
E)economy has grown by 20 percent

Question

Quizplus · Accepted Answer

GDP price index is calculated as (Nominal GDP/Real GDP)*100. So, in this case, GDP price index would be (4,000/5,000)*100 = 80. Choice A is incorrect because CPI is not given and cannot be calculated with the given information. Choice B is also incorrect as there is no way to determine a percentage change in economic activity from the information given. Choice C is incorrect as the calculation for GDP price index is incorrect. Choice E is incorrect as there is no information on the percentage change in real GDP from one year to another.

If Real GDP in a Particular Year Is $5,000 Trillion