GDP Calculation 3

Question 1

Nominal GDP differs from Real GDP in that Nominal GDP:

Accepted Answer

Is measured at current prices without adjusting for inflation

Answer

Nominal GDP uses current-year prices and therefore reflects both output changes and price level changes.

Question 2

If Nominal GDP is $22T and the GDP deflator is 110, what is Real GDP?

Accepted Answer

$20T

Answer

Real GDP = (Nominal GDP / GDP Deflator) × 100 = ($22T / 110) × 100 = $20T.

Question 3

The GDP deflator is calculated as:

Accepted Answer

(Nominal GDP / Real GDP) × 100

Answer

The GDP deflator = (Nominal GDP ÷ Real GDP) × 100, measuring the overall price level relative to a base year.

Question 4

If real GDP grew from $18T to $19.8T, what was the real GDP growth rate?

Accepted Answer

10%

Answer

Growth rate = ($19.8T - $18T) / $18T × 100 = 10%.

Question 5

Which best describes the difference between GDP and GNP?

Accepted Answer

GDP counts output within borders; GNP counts output by a country's residents regardless of location

Answer

GDP is location-based (within borders), while GNP (now called GNI) is residency-based (citizens/firms wherever they produce).

GDP - Gross Domestic Product Practice Test