Question

In: Economics

The following table shows nominal GDP and an appropriate price index for a group of selected...

The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data. Instructions: Enter your responses in the gray-shaded cells. Round your answers to 2 decimal places.

Year Nominal GDP, Billions Price Index (2005 = 100) Real GDP, Billions Effect on Nominal GDP

1968 $914.80 22.01 ### ###

1978 2298.80 40.40 ### ###

1988 5105.40 66.98 ### ###

1998 8798.50 85.51 ### ###

2008 14446.40 108.48 ### ###

(Please fill in the (blanks= ###) Thanks)

Solutions

Expert Solution

Year Nominal GDP Billions $ Price Index Real GDP Billions $ Effect on nominal GDP
1968 914.80 22.01 4156.29 Inflating
1978 2298.80 40.4 5690.1 Inflating
1988 5105.40 66.98 7622.28 Inflating
1998 8798.50 85.51 10289.44 Inflating
2008 14446.40 108.48 13317.11 Deflating
Price index= Nominal GDP/Real GDP
1968
Let real GDP be x
(914.80/x)=22.01
22.01 x=914.80
x=$41.5629. x 100=$4156.29
1978
Let real GDP be x
(2298.80/x)=40.4
40.4 x=2298.80
x=$56.9010x 100=$5690.10
1988
Let real GDP be x
(5105.40/x)=66.98
66.98x=5105.40
x=$76.2228 *100=$7622.28
1998
Let real GDP be x
(8798.50/x)=85.51
85.51x=8798.50
x=$102.8944 x100=$102,89.44
2008
Let real GDP be x
(14,446.40/x)=108.48
108.48x=14446.40
x=$133.1711 x100=$13317.11

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