If nominal GDP rises from $5 billion to $6 billion, when the GDP deflator goes from 100 to 110, real GDP
A)rises.
B)falls.
C)stays the same.
D)could either be rising or falling.

Question

If nominal GDP rises from $5 billion to $6 billion, when the GDP deflator goes from 100 to 110, real GDP
A)​rises.
B)​falls.
C)​stays the same.
D)​could either be rising or falling.

Quizplus · Accepted Answer

Real GDP is calculated by dividing nominal GDP by the GDP deflator and multiplying by 100. So, when nominal GDP rises from $5 billion to $6 billion, and the GDP deflator goes from 100 to 110, real GDP becomes (6/110)*100 = $5.45 billion. Therefore, real GDP rises.

If Nominal GDP Rises from $5 Billion to $6 Billion