Asked by Shaylie Pickrell on Jul 04, 2024
Verified
Suppose that,since the base year,all prices have risen by 100%.This year's current-dollar GDP is $2,000 billion.Then constant-dollar GDP is
A) $4,000 billion.
B) $3,000 billion.
C) $2,000 billion.
D) $1,000 billion.
E) $500 billion.
Current-dollar GDP
Gross Domestic Product measured in current prices, without adjusting for inflation or deflation.
Constant-dollar GDP
Gross domestic product figures that have been adjusted for inflation to reflect the real value of goods and services produced in a country.
- Draw a distinction between real and nominal GDP, and fathom the influence of inflation and deflation on these economic metrics.
Verified Answer
MY
MAYRA YANEZJul 08, 2024
Final Answer :
D
Explanation :
If all prices have risen by 100% since the base year, it means that the price level has doubled. To find the constant-dollar GDP (which reflects the volume of production at the base year prices), you divide the current-dollar GDP by the inflation factor. Here, the inflation factor is 2 (100% increase), so $2,000 billion / 2 = $1,000 billion.
Learning Objectives
- Draw a distinction between real and nominal GDP, and fathom the influence of inflation and deflation on these economic metrics.