Nominal GDP in a country was $8759.9 billion in 2017 and $9254.6 billion in 2018. The GDP deflator was 102.86 for 2017 and 104.37 for 2018.(a)What is the growth rate of nominal GDP between 2017 and 2018?(b)What is the inflation rate from 2017 to 2018?(c)What is the growth rate of real GDP from 2017 to 2018?

What will be an ideal response?


(a)9254.6/8759.9 × 100% = 5.6%.
(b)[(104.37/102.86) - 1] × 100% = 1.5%.
(c)Real GDP (2017) = 8759.9/1.0286 = 8516.3.
 Real GDP (2018) = 9254.6/1.0437 = 8867.1.
 Growth rate = [(8867.1/8516.3) - 1] × 100% = 4.1%.
 Note that the growth rate of nominal GDP (5.6%) equals the inflation rate (1.5%) plus the growth rate of real GDP (4.1%).

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