Calculating Real GDP (1 Viewer)

Frie

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How do you do this question? From HSC 2006 Question 12



I ended up with the answer B using the following working out however the answer is A:

Inflation Rate = 125-110/110 = 13.6%

Real GDP = Nominal (820) / 1.136 = 721.6

My working out ignores the second part "compared to the base year" as I'm not sure how to implement that part.
 

JFX

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It says compared to the base year so you need to compare year 3 to year 1.

So rather than using year 3 and 2, use year 3 and year 1 to calculate the inflation rate and your real GDP.

So Inflation Rate = 125-100/100 = 25%

Real GDP = Nominal (820) / 1.25 = $656.0
 

Frie

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Oh right, now it makes more sense. Thank you.
 

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