When calculating real GDP we must use the GDP deflator for that year. This allows us to adjust figures measured in current prices for the rate of inflation, and show them in terms of a base year. Assuming that GDP in current prices grows from £120bn in year 1 to £160bn in year 2 and that the GDP deflator rises from 100 in year 1 to 130 in year 2, by how much has real GDP grown?
When calculating real GDP we must use the GDP deflator for that year. This allows us to adjust figures measured in current prices for the rate of inflation, and show them in terms of a base year. Assuming that GDP in current prices grows from £120bn in year 1 to £160bn in year 2 and that the GDP deflator rises from 100 in year 1 to 130 in year 2, by how much has real GDP grown?
Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:William J. Baumol, Alan S. Blinder
Chapter6: How Statisticians Measure Inflation
Section6.A: How Statisticians Measure Inflation
Problem 2TY
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