if nominal gdp rises from 5bil to 6bil, when the gdp deflator goes from 100 to 120?

Question

what happens
a. rises
b.falls
c.stays the same
d. could either be rising or falling

Answer 1

C.

There is a much simpilar way. Look the GDP increases by 20%
The GDP deflator increases by 20%

20%-20%= 0%

No real growth

Answer 2

GDP Deflator= Nominal GDP/Real GDP X100=
Initially 100=5 billion/Real GDPX100. If it rises to 120, and Nominal GDP rises to 6 billion 120=6 billion/Real GDP*100. The best way to approach this problem is to solve for Real GDP which is unknown.

100=5 billion/Real GDP*100
100 Real GDP=5 billion/100
Real GDP=5 billion/100X100
Real GDP=5 billion/10,000
5,000 million/10,000=Real GDP
.5 million, or 500,000=Real GDP.
That's what happens initially.

Let's try this when nominal GDP is 6 billion, and the GDP deflator
increases from 100 to 120.
GDP Deflator= Nominal GDP/Real GDP X100
120=6 billion/Real GDPX100
12000=6 billion/Real GDP
6 billion/12,000=Real GDP
6,000 million/12,000=Real GDP
.5 million, or 500,000=Real GDP

The answer after going through the steps is c. stays the same.
I'm assuming you were asking what would happen to Real GDP
if the nominal GDP rises from 5 billion to 6 billion, and the GDP
deflator rises from 100 to 120.