The following table shows nominal GDP and an appropriate price index for a group

Question

The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP, and indicate in each calculation whether you are inflating or deflating the nominal GDP data.


Instructions: Round your answers to two decimal places.

Nominal GDP Price Index
(billions) (Year 2005 = 100) Real GDP(billions)


1968 $ 914.80 24.01 _____ $
1978 2298.80 42.40 _____ $
1988 5105.40 68.98 _____$
1998 8798.50 87.51 _____$
2008 14446.40 110.48 _____$

Explanation / Answer

Nominal GDP = Real GDP x Price Index => Real GDP = Nominal GDP / Price Index year nominal GDP price index(2005) real GDP infaltion/deflation 1968 914.80 24.01 38.1 inflation 1978 2298.80 42.40 54.22 inflation 1988 5105.40 68.98 74.01 inflation 1998 8798.50 87.51 100.54 inflation 2008 14446.40 110.48 130.76 inflation

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