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If GDP has increased by 4 percent and inflation is 1 percent, what has happened to real GDP?

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If GDP has increased by 4 percent and inflation is 1 percent, what has happened to real GDP?

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  1. Real GDP increased by 4-1=+3%

    That was simplified calculation, more correct would be:

    Real GDP=+4% =1.04

    Inflation=1% =1.01

    Real GDP growth = 1.04/1.01≈1.0297≈+2.97%

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