Macro Unit 2.6B- GDP Deflator Practice AP Macroeconomics

Mr. Clifford explains the GDP deflator, a tool used to adjust nominal GDP for inflation, making it comparable to real GDP. He provides the formula for calculating the GDP deflator and explains its significance through examples. The video includes practice questions to help viewers understand how to calculate nominal GDP, real GDP, and the GDP deflator. Solutions to these questions are provided, emphasizing the logic behind the calculations. The video concludes with a summary of the key concepts discussed.

What is the primary purpose of the GDP deflator?

• To measure the total output of an economy

• To determine the exchange rate

• To adjust nominal GDP for inflation

• To calculate the unemployment rate

If the GDP deflator is 105, what does this indicate about price changes since the base year?

• Prices have decreased by 5%

• Prices have increased by 10%

• Prices have increased by 5%

• Prices have remained the same

Given a nominal GDP of $100 billion and a real GDP of $80 billion, what is the GDP deflator?

• 125

• 100

• 80

• 105

If the real GDP is $200 billion and the GDP deflator is 120, what is the nominal GDP?

• $180 billion

• $200 billion

• $220 billion

• $240 billion

With a nominal GDP of $300 billion and a GDP deflator of 150, what is the real GDP?

• $200 billion

• $300 billion

• $150 billion

• $250 billion