If real GDP equals $200 billion this year and nominal GDP equals $300 billion,the price level since the base year has increased
A)$100 billion
B)$200 billion
C)50 percent
D)100 percent
E)33 percent

Question

Quizplus · Accepted Answer

We can use the GDP deflator formula to calculate the increase in price level since the base year:
GDP deflator = (nominal GDP / real GDP) x 100
GDP deflator = (300 / 200) x 100
GDP deflator = 150
This means that the price level has increased by 50 percent (150 - 100 = 50) since the base year. So the correct answer is C) 50 percent.

If Real GDP Equals $200 Billion This Year and Nominal