Question

Which formula converts Nominal GDP into Real GDP when the base year index is 100?

Options

• \[\text{Real GDP}=\left(\frac{\text{Price Index}}{\text{Nominal GDP}}\right)\times100\]

• \[\text{Real GDP}=\frac{\text{Nominal GDP}}{\mathrm{Real~GDP}}\times100\]

• \[\text{Real GDP}=\left(\frac{\text{Nominal GDP}}{100}\right)\times\text{Price Index}\]

• \[\text{Real GDP}=\left(\frac{\text{Nominal GDP}}{\text{Price Index}}\right)\times100\]

Answer 1

Real GDP is calculated as Nominal GDP divided by the Price Index, multiplied by 100. The base year index is 100 in this conversion.