in 2005 a country''s nominal GDP was R500 billion. in 20006 the same country's nominal GDP was R600 billion. the inflation rate in 2006 was 17%. what is the appropriate value of the country's real GDP in 2006 (measued in 2005 prices) ?

Answer 1

To calculate the real GDP for 2006 measured in 2005 prices, we need to adjust the nominal GDP of 2006 for inflation. Here's how you do it:

1. Identify the Nominal GDP for 2006:
   Nominal GDP in 2006 = R600 billion

2. Determine the inflation rate:
   Inflation rate for 2006 = 17% = 0.17

3. Calculate the GDP deflator:
   The GDP deflator can be calculated as:
   \[ \text{GDP Deflator} = 1 + \text{Inflation Rate} = 1 + 0.17 = 1.17 \]

4. Calculate the Real GDP:
   Real GDP adjusts the nominal GDP for inflation. The formula is:
   \[ \text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \]
   Plugging in the numbers:
   \[ \text{Real GDP} = \frac{600 \text{ billion}}{1.17} \approx 512.82 \text{ billion} \]

Thus, the appropriate value of the country's real GDP in 2006 measured in 2005 prices is approximately R512.82 billion.