Calculating the GDP Deflator Suppose that the base year is 2009. Real GDP in 200

Question

Calculating the GDP Deflator Suppose that the base year is 2009. Real GDP in 2009 was $10 trillion (in 2009 dollars). The GDP deflator in 2013 was 112, and real GDP in 2013 was $11 trillion (in 2009 dollars). What was the percentage increase in RGDP between 2009 and 2013? By what percentage did the cost of living (as measured from GDP Deflator) rise between 2009 and 2013? NGDP in 2013 wastrillion. Round up your answer to the second decimal. The percentage increase in production (RGDP) between 2009 and 2013 ispercent. The cost of living (as measured from GDP Deflator) between 2009 and 2013 rose bypercent. 1 2.32; 10; 12 2.32: 1:12 1.23; 10; 1.2 12.32; 10; 1.2

Explanation / Answer

Option (1) is correct.

(A) NGDP in 2013 ($ Trillion) = (RGDP in 2013 x GDP Deflator in 2013) / 100

= (11 x 112) x 100

= 12.32

(B) % increase in RGDP = ($11 trillion / $10 trillion) - 1 = 1.1 - 1 = 0.1 = 10%

(C) Increase in GDP Deflator (Cost of living) = (112 / 100) - 1 = 1.12 - 1 = 0.12 = 12%

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