Suppose that this years nominal GDP is $16 trillion. To account for the effects of inflation, we

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Suppose that this year’s nominal GDP is $16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago.

Using that index, we find that this year’s real GDP is $15 trillion.

Given those numbers, we can conclude that the current value of the index is:

a. higher than 100.

b. lower than 100.

c. still 100.

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Macroeconomics

ISBN: 9781264112456

22nd Edition

Authors: Campbell McConnell, Stanley Brue, Sean Flynn

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