If a country has a GDP of $800 billion and the inflation rate is 6%, what will b

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Question: If a country has a GDP of $800 billion and the inflation rate is 6%, what will be the nominal GDP after one year?

Options:

Correct Answer: $848 billion

Solution:

Nominal GDP after inflation = 800 billion * (1 + 0.06) = 800 billion * 1.06 = $848 billion.

If a country has a GDP of $800 billion and the inflation rate is 6%, what will be the nominal GDP after one year?

If a country has a GDP of $800 billion and the inflation rate is 6%, what will be the nominal GDP after one year?

Step 1: Identify the current GDP, which is $800 billion.
Step 2: Identify the inflation rate, which is 6%.
Step 3: Convert the inflation rate from a percentage to a decimal by dividing by 100. So, 6% becomes 0.06.
Step 4: Add 1 to the decimal inflation rate. This gives you 1 + 0.06 = 1.06.
Step 5: Multiply the current GDP by the result from Step 4. So, $800 billion * 1.06 = $848 billion.
Step 6: The result is the nominal GDP after one year, which is $848 billion.

Nominal GDP Calculation – Understanding how to adjust GDP for inflation to find the nominal GDP for the next year.
Inflation Rate Application – Applying the inflation rate to the current GDP to project future nominal GDP.