Question

What is the growth rate of nominal​ GDP? Y0 real GDP= $1200 (in millions) Y1 real GDP= $1400 (in millions) Y0 price level= 125 Y1 price level= 140

Answer 1

12%

Step-by-step explanation:

The computation of the growth rate of nominal GDP is shown below:

As we know that

Nominal GDP = Real GDP × (Price level ÷ 100)

For

Nominal GDP, Y0

= $1,200 × (125 ÷ 100)

= $1,500

And,

Nominal GDP, Y1 is

= $1,200 × (140 ÷ 100)

= $1,680

Now the growth rate of nominal GDP is

= ($1,680 ÷ $1,500) - 1

= 12%