Which of the following formula is correct ? Option 1: Real GDP = (Price Index)/(Nominal GDP) x 100 Option 2: Real GDP = (Nominal GDP)/(Price Index) x 100 Option 3: Nominal GDP = (Real GDP)/(Price Index) x 100 Option 4: Nominal GDP = (Price Index)/(Real GDP) x 100

Answer: Real GDP = (Nominal GDP)/(Price Index) x 100. Solution: The GDP deflator is defined as Price Index = (Nominal GDP)/(Real GDP) x 100. Rearranging this gives Real GDP = (Nominal GDP)/(Price Index) x 100. Hence option 2 is correct.

Macro

National Income

Easy

Which of the following formula is correct ?

Real GDP = $\frac{\text{Price Index}}{\text{Nominal GDP}} \times 100$

Real GDP = $\frac{\text{Nominal GDP}}{\text{Price Index}} \times 100$

Nominal GDP = $\frac{\text{Real GDP}}{\text{Price Index}} \times 100$

Nominal GDP = $\frac{\text{Price Index}}{\text{Real GDP}} \times 100$

✅ Correct Option: 2

The GDP deflator is defined as $\text{Price Index} = \frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100$ . Rearranging this gives Real GDP = $\frac{\text{Nominal GDP}}{\text{Price Index}} \times 100$ . Hence option 2 is correct.

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