Understanding GDP and Inflation

How is nominal GDP calculated for a given year?

• By dividing the total value of all products by the number of products

• By multiplying the quantity of each product by its price and summing the results

• By subtracting the cost of production from the total sales

• By adding the total quantities of all products

What does a GDP deflator of 150 indicate about inflation since the base year?

• Prices have remained the same

• Prices have doubled

• Prices have increased by 50%

• Prices have decreased by 50%

How do you calculate real GDP using the GDP deflator?

• Subtract the deflator from nominal GDP

• Multiply nominal GDP by the deflator

• Divide nominal GDP by the deflator and multiply by 100

• Add the deflator to nominal GDP

If wages increase by 20% but inflation is 50%, what happens to real wages?

• Real wages increase by 50%

• Real wages remain the same

• Real wages increase by 30%

• Real wages decrease by 30%

How does unexpected inflation affect borrowers with fixed-rate loans?

• Borrowers are better off because they pay back with less valuable money

• Borrowers have to renegotiate their loan terms

• Borrowers are unaffected by inflation

• Borrowers are worse off because they pay more