Question

If the Real GDP is rs. 400 and Nominal GDP is rs. 450, calculate the Price Index. (Base=100)

Answer 1

Solution

Real GDP = Normal GDP / PRICE INDEX OF NORMAL YEAR  × 100 

Substitute the given numbers in formula

400 = 400 / PRICE INDEX OF NORMAL YEAR  × 100 


PRICE INDEX OF NORMAL YEAR = 112.5

Answer 2

Price Index in given year = 112.5

Explanation:

Given:

Real GDP during the year = 400

Nominal GDP during the year = 450

Price Index in given year = ?

Base = 100

Computation of Price Index in given year:

Price Index in given year = [Nominal GDP during the year / Real GDP during the year] × 100

Price Index in given year = [450/400] × 100

Price Index in given year = [1.125] × 100

Price Index in given year = 112.5

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