Multiple Choice
In macroeconomics, real GDP is GDP in a given year measured using:
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10. Measuring National Output and Income
Nominal GDP and Real GDP
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In macroeconomics, the GDP deflator is defined as the ratio of which two variables (multiplied by 100)?
A
Consumer Price Index (CPI) to the unemployment rate
B
Nominal GDP to real GDP
C
Real GDP to nominal GDP
D
Nominal GDP to potential GDP
Verified step by step guidance1
Understand that the GDP deflator is a measure of the overall level of prices in an economy, reflecting the price changes of all domestically produced final goods and services.
Recall the definition of the GDP deflator, which is used to convert nominal GDP into real GDP by removing the effects of price changes.
Identify the two variables involved in the GDP deflator: nominal GDP and real GDP.
Write the formula for the GDP deflator as the ratio of nominal GDP to real GDP, multiplied by 100 to express it as an index: \[\text{GDP Deflator} = \left( \frac{\text{Nominal GDP}}{\text{Real GDP}} \right) \times 100\]
Note that this ratio shows how much prices have changed since the base year, with nominal GDP reflecting current prices and real GDP reflecting constant base-year prices.
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Related Practice
Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
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Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
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Nominal GDP and Real GDP practice set
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