Question

The accompanying table provides the annual real GDP (in billions of 2009 dollars) and nominal GDP (in billions of dollars) for the United States. $$\begin{array}{c|c|c|c|c|c} & \mathbf{2 0 0 9} & \mathbf{2 0 1 0} & \mathbf{2 0 1 1} & \mathbf{2 0 1 2} & \mathbf{2 0 1 3} \\ \begin{array}{c} \text { Real } \\ \text { GDP } \\ \text { (billions } \end{array} & 14,417.9 & 14,779.4 & 15,052.4 & 15,470.7 & 15,761.3 \\ \begin{array}{c} \text { of 2009 } \\ \text { dollars) } \end{array} & & & & \\ \begin{array}{c} \text { Nominal } \\ \text { GDP } \\ \text { (billions } \\ \text { of } \\ \text { dollars) } \end{array} & 14,417.9 & 14,958.3 & 15,533.8 & 16,244.6 & 16,799.7 \\ \end{array}$$ a. Calculate the GDP deflator for each year. b. Use the GDP deflator to calculate the inflation rate for all years except 2009

Name: Problem 11, Chapter 7: Macroeconomics
Uploaded: 2021-08-15T18:23:48-08:00
Duration: 2 min 52 s
Channel: Karan Sood

   The accompanying table provides the annual real GDP (in billions of 2009 dollars) and nominal GDP (in billions of dollars) for the United States.
$$\begin{array}{c|c|c|c|c|c} 
& \mathbf{2 0 0 9} & \mathbf{2 0 1 0} & \mathbf{2 0 1 1} & \mathbf{2 0 1 2} & \mathbf{2 0 1 3} \\
\begin{array}{c}
\text { Real } \\
\text { GDP } \\
\text { (billions }
\end{array} & 14,417.9 & 14,779.4 & 15,052.4 & 15,470.7 & 15,761.3 \\
\begin{array}{c}
\text { of 2009 } \\
\text { dollars) }
\end{array} & & & & \\
\begin{array}{c}
\text { Nominal } \\
\text { GDP } \\
\text { (billions } \\
\text { of } \\
\text { dollars) }
\end{array} & 14,417.9 & 14,958.3 & 15,533.8 & 16,244.6 & 16,799.7 \\
\end{array}$$
a. Calculate the GDP deflator for each year.
b. Use the GDP deflator to calculate the inflation rate for all years except 2009

Macroeconomics

Paul Krugman, Robin… 4th Edition

Chapter 7, Problem 11

Instant Answer

Solved by Expert Karan Sood

08/15/2021

Step 1

The GDP deflator is calculated by dividing the nominal GDP by the real GDP and then multiplying by 100. For 2009, the GDP deflator is calculated as follows: \[GDP Deflator_{2009} = \frac{Nominal GDP_{2009}}{Real GDP_{2009}} * 100 = \frac{14,417.9}{14,417.9} * Show more…

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The accompanying table provides the annual real GDP (in billions of 2009 dollars) and nominal GDP (in billions of dollars) for the United States. $$\begin{array}{c|c|c|c|c|c} & \mathbf{2 0 0 9} & \mathbf{2 0 1 0} & \mathbf{2 0 1 1} & \mathbf{2 0 1 2} & \mathbf{2 0 1 3} \\ \begin{array}{c} \text { Real } \\ \text { GDP } \\ \text { (billions } \end{array} & 14,417.9 & 14,779.4 & 15,052.4 & 15,470.7 & 15,761.3 \\ \begin{array}{c} \text { of 2009 } \\ \text { dollars) } \end{array} & & & & \\ \begin{array}{c} \text { Nominal } \\ \text { GDP } \\ \text { (billions } \\ \text { of } \\ \text { dollars) } \end{array} & 14,417.9 & 14,958.3 & 15,533.8 & 16,244.6 & 16,799.7 \\ \end{array}$$ a. Calculate the GDP deflator for each year. b. Use the GDP deflator to calculate the inflation rate for all years except 2009

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Key Concepts

GDP Deflator

The GDP deflator is a broader measure of inflation within the economy. It is calculated by dividing nominal GDP by real GDP and multiplying by 100, thereby providing an index that reflects the changes in prices for all domestically produced goods and services over time.

Inflation Rate Calculation

The inflation rate is determined by calculating the percentage change in a price index, such as the GDP deflator, from one period to the next. This measure indicates how quickly the general level of prices is rising, which is essential for economic analysis and policy making.

Real GDP and Nominal GDP

Real GDP measures an economy’s output using constant prices from a base year, effectively separating changes in output from changes in the price level, while nominal GDP is calculated using current prices and thus reflects both output and price changes. This distinction is crucial for understanding economic growth versus inflation effects.

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