GDP, Inflators, Deflators and Price Indexes
Calculating Real GDP
Year / Output / Price/Unit / Price Index / NGDP / RGDP1 / 5 / $10 / 100 / 50 / $50
2 / 7 / $20 / 200 / 140 / $70
3 / 8 / $25 / 250 / 200 / $80
4 / 10 / $30
5 / 11 / $28
- Complete the chart above. Show your work below
- Price index for year 4b. Price index for year 5
c. NGDP for year 4d. NGDP for year 5
e. RGDP year 4e. RGDP for year 5
2. What year is the base year? ______
3. By what percentage did the price level rise between year 1 and year 4? Show your work here. Circle your answer.
NGDP, RGDP and GDP Price Index for selected years
Year / Nominal GDP(in billions of $) / Real GDP
(in billions of $) / GDP Price Index
(in billions of $)
1975 / 1635.3 / 4084.4
1980 / 2795.6 / 57.05
1985 / 4213.0 / 5717.1 / 73.69
1990 / 5803.2 / 6707.9
1995 / 7400.5 / 98.10
1996 / 7813.2 / 7813.2 / 100.00
1999 / 9299.2 / 8875.8 / 104.77
4. Which year is the base year? ______
a. How do you know?
5. Which year(s) would use inflators to determine RGDP? ______
a. Why?
6. Which year(s) would use deflators to determine RGDP?
______
a. Why?
7. Fill in the correct values on the chart above. Show your work here.
a. GDP price index for 1975
7b. Real GDP for 1980
7c. GDP Price Index for 1990
7d. Real GDP 1995
8. What was the percentage of growth of Real GDP between 1975 and 1985? Show your work below.
9. Was the percentage rate of growth of GDP greater from ’75 to ’80, or from 1990 to 1999? Show your work below.
10. The Real GDP of China was greater than that of the United States this year measured in US dollars. From that information, can we conclude that the Chinese now have a higher standard of living than Americans? Give two factors that need to be considered to determine your answer.