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25 October, 10:11

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010, how much did prices increase?

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  1. 25 October, 10:35
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    19%

    Explanation:

    Given that,

    Nominal GDP in 2010 = $200 billion

    Nominal GDP in 2009 = $180 billion

    GDP deflator in 2010 = 125

    GDP deflator in 2009 = 105

    Percentage change in prices:

    = Percentage change in GDP deflator

    = (Change in GDP deflator : GDP deflator in 2009) * 100

    = [ (125 - 105) : 105] * 100

    = (20 : 105) * 100

    = 0.19 * 100

    = 19%

    Therefore, the prices increases by 19%.
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