Calculate the real GDP?

Question

Calculate the real GDP in each year, assuming that the nominal GDP was $559 billion in the base year, $577 billion in year one, and $605 billion in year two; and that the price index rose from 100 to 104.5 in the first year, and up to 108.3 in the second year. If the price index 20 years before the base year was 41.2, and the nominal GDP for 20 years before the base year was 191.0, what was the real GDP for that year? Show your work in all cases.

Answer 1

Real GDP = (Nominal GDP/ GDP Price Deflator)*100

GDP Price Deflator = Price Index = 100* (1+ inflation rate for the year)

GDP Price Deflator for year in year one=  104

Read GDP for year one = ($577billion/104)*100 = $552.15311 billion ie. approximately $552 billion

GDP Price Deflator for Year two is 108.3

Read GDP for year two = ($605/108.3)*100 billion = $558.6334257billion = $559 billion.

Price Deflator for year 20 years before base year = 41.2

Read GDP 20 years before base year

= (191.0/41.2)*100billion = $463.592233 = $464 billion approximately,.

Caculations done in Excell but I see very little with my failing eye sight.