Question

In 2018, a nation’s population was 10 million. Its nominal GDP was $40 billion, and its price index was 100. In 2019, its population had increased to 12 million, its nominal GDP had risen to $57.6 billion, and its price index had increased to 120. What was this nation’s economic growth rate during the year?

Answer 1

The nominal GDP in base year 2014 was $40 billion. The nominal GDP in year 2015 with price index 120 was $57.6 billion. The real GDP in 2015 can be calculated as follows :

GDP (real) = GDP (nominal) / price index * 100

GDP (real) = 57.6 / 120 * 100

GDP (real) = $48 billion

The growth rate in real GDP from 2014 to 2015 is 1.2%.

Growth rate = 48 * (100/40) = 1.2%

Therefore the growth rate is 12%