What is the nominal GDP if the real GDP is 500 and price index is 150?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. 750.
To calculate the nominal GDP, we use the following formula:
Nominal GDP = Real GDP × ( Price Index) / (100)
Real GDP = 500
Price Index = 150
Nominal GDP = 500 × ( 150 / 100 )
Nominal GDP = 500 × 1.5 = 750
So, the nominal GDP is 750.
Real GDP measures the value of goods and services produced, adjusted for inflation (i.e., it is expressed in constant prices).
Price Index represents the change in the price level of goods and services in an economy compared to a base year (in this case, 150 indicates that prices have increased by 50% compared to the base year).
Nominal GDP measures the value of goods and services produced at current prices, without adjusting for inflation. It reflects both the actual production and the changes in the price level.