GDP rises from $4 trillion in 2006, the base year, to $5 trillion in 2012. The GDP deflator in 2012 is 120. Find real GDP in 2012. Find the percentage increase in real GDP between 2006 and 2012.
54,00
To find the real GDP in 2012, we need to adjust the nominal GDP of $5 trillion by the GDP deflator.
First, let's calculate the growth rate of the GDP deflator from 2006 to 2012.
The formula to calculate the growth rate is:
Growth rate = (Current year - Base year) / Base year * 100%
So, for the GDP deflator:
Growth rate = (120 - 100) / 100 * 100%
= 20%
This means that the price level has increased by 20% from 2006 to 2012.
To get the real GDP in 2012, we need to divide the nominal GDP in 2012 by the GDP deflator:
Real GDP in 2012 = Nominal GDP in 2012 / GDP deflator in 2012
Real GDP in 2012 = $5 trillion / 1.20
= $4.17 trillion
So, the real GDP in 2012 is approximately $4.17 trillion.
To find the percentage increase in real GDP between 2006 and 2012, we can use the following formula:
Percentage increase = (Final value - Initial value) / Initial value * 100%
Using the formula:
Percentage increase = ($4.17 trillion - $4 trillion) / $4 trillion * 100%
= $0.17 trillion / $4 trillion * 100%
= 0.0425 * 100%
= 4.25%
Therefore, the percentage increase in real GDP between 2006 and 2012 is approximately 4.25%.