If NGDP is nominal GDP and RGDP is real GDP, which of the following can be used to calculate inflation?
A) percent change in NGDP + percent change in RGDP
B) percent change in NGDP - percent change in RGDP
C) percent change in NGDP ｴ percent change in RGDP
D) percent change in RGDP + percent change in NGDP
E) percent change in RGDP -percent change in NGDP

Question

Quizplus · Accepted Answer

Inflation is calculated by looking at the growth rate of nominal GDP (which includes inflation) and subtracting the growth rate of real GDP (which is adjusted for inflation). This difference gives the inflation rate, as real GDP holds prices constant over time, allowing the change in nominal GDP to reflect changes in price level.

If NGDP Is Nominal GDP and RGDP Is Real GDP