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Suppose that in 2005 Real GDP was $40 billion and the GDP price index was 1.20. If nominal GDP increased by 40% between 2005
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Answer #1

Answer- Correct option is 'd'

Given,    Real GDP = 40

             Price Index = 1.20

          Real GDP = Nominal GDP / Price Index

      40   = Nominal GDP / 1.20

Nominal GDP in 2005 = 40 * 1.20

                             = 48

Nominal GDP in 2005 is $ 48 billion.

If nominal GDP increased by 40 % between 2005 and 2006.

Nominal GDP in 2006   =   Nominal GDP in 2005 + 40 %

                                  =   48 + 40 %

                                  =   67.2

Nominal GDP in 2006 is $ 67.2 billion.

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