Nominal GDP, real GDP, rate of inflation

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  If V constant, growth rate of M = inflation rate + real GDP growth rate Real interest rate + inflation rate = Nominal interest rate a) what is % GDP inflation Growth rate of M (5%)= inflation rate + real GDP growth rate(3%) Therefore

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  Nominal = Real + Inflation Expected inflation is 2%, and natural real GDP growth rate is given to be 3%. Hence the nominal GDP growth rate is 5%.

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  Nominal GDP is growing faster than real GDP, so inflation must be increasing faster than GDP. Therefore, the inflation rate must be higher than the growth rate of the economy.

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  /104.37)/($8,759.9/102.86) - 1 = 0.0412 = 4.12% This solution analyzes the growth rate of nominal GDP, inflation rate and growth rate of real GDP.

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  year 2. 2 What is the growth rate of its real GDP?