If the GDP deflator increased by 3 percent while nominal GDP grew by 5 percent:

a) real GDP would grow by 2 percent.
b) real GDP would grow by 8 percent.
c) real GDP would be unchanged.
d) real GDP would fall by 3 percent.

My attempt to get the solution:

Let DGDP represent GDP deflator, NGDP represent Nominal GDP, and RGDP represent Real GDP.
Then I used arbitrary values.
DGDP1 = 53
NGDP1 = $200

And to calculate a second set of values based on the question:

% change = ((new value - old value)/old value)*100
New value = (% change/100)(old value) + old value

DGDP2 = (3/100)(53)+53 = 54.59
NGDP2 = (5/100)($200)+$200 = $210

RGDP1 = (NGDP1/DGDP1)*100 = ($200/53)*100 = $377.3584906
RGDP2 = (NGDP2/DGDP2)*100 = ($210/54.59)*100 = $384.6858399

RGDP2 - RGDP1 = $7.327349334 = $7.33

That is not exactly one of the multiple choice options, although it is close to (b). However, I am not sure if I should just go for that option if I may have done something wrong.

To solve this question, you did everything correctly up to finding the change in Real GDP (RGDP2 - RGDP1 = $7.33). However, it seems that there is no exact option matching this value in the given multiple-choice options.

In this case, you can choose the option that best aligns with the calculated change in real GDP. Looking at the options provided:
a) real GDP would grow by 2 percent.
b) real GDP would grow by 8 percent.
c) real GDP would be unchanged.
d) real GDP would fall by 3 percent.

Since the calculated change in real GDP is positive ($7.33), we can conclude that real GDP has grown. Therefore, the closest option would be option (b) - real GDP would grow by 8 percent. It may not be an exact match, but it is the closest option given the calculated value.

In summary, based on the calculations and the options provided, the best answer is: b) real GDP would grow by 8 percent.