Suppose the GDP deflator was 200 in 2008 and 190 in 2009. In addition, nominal GDP was 1% lower in 2009 than in 2008. Given this information, the approximate, rate of real GDP growth in 2009 was: Group of answer choices4%6%3%5%
Question
Suppose the GDP deflator was 200 in 2008 and 190 in 2009. In addition, nominal GDP was 1% lower in 2009 than in 2008. Given this information, the approximate, rate of real GDP growth in 2009 was: Group of answer choices4%6%3%5%
Solution
To calculate the real GDP growth rate, we first need to understand the relationship between nominal GDP, real GDP, and the GDP deflator. The formula is as follows:
Nominal GDP = Real GDP * (GDP Deflator / 100)
We know that the GDP deflator was 200 in 2008 and 190 in 2009. We also know that nominal GDP was 1% lower in 2009 than in 2008.
Let's denote the 2008 nominal GDP as X. Therefore, the 2009 nominal GDP is 0.99X (1% lower than X).
We can set up the following equations based on the formula above:
2008: X = Real GDP (2008) * (200 / 100) 2009: 0.99X = Real GDP (2009) * (190 / 100)
We can solve these equations to find the real GDP for 2008 and 2009.
Real GDP (2008) = X / 2 Real GDP (2009) = 0.99X / 1.9
To find the growth rate of real GDP from 2008 to 2009, we use the formula:
Growth Rate = (Real GDP (2009) - Real GDP (2008)) / Real GDP (2008) * 100%
Substituting the values we found:
Growth Rate = ((0.99X / 1.9) - (X / 2)) / (X / 2) * 100%
Solving this equation gives us the approximate real GDP growth rate in 2009. The answer should be one of the options provided: 4%, 6%, 3%, or 5%.
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