If nominal gdp is $4,000 billion and the amount of money demanded for transactions purposes is $800 billion, it can generally be concluded that

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19-12-2022
Business

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If nominal gdp is $4,000 billion and the amount of money demanded for transactions purposes is $800 billion, it can generally be concluded that

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Srivastava Srivastava · Answer 1 · 2022-12-24T11:50:21-05:00

It can be assumed that each dollar will be spent on average five times each year if the nominal GDP is $4,000 billion and the quantity of money needed for transactions is $800 billion.

Why does GDP in nominal and real terms differ?

While real GDP uses a GDP deflator to account for inflation and, as a result, solely shows changes in real output, nominal GDP by definition reflects inflation. The nominal GDP of a nation is typically larger than the actual GDP because inflation is typically a positive number. The Gross Domestic Product (GDP) without regard to inflation is known as nominal GDP. Real GDP is a nation's GDP that has been corrected for inflation. A nation's nominal GDP is calculated using current-year pricing for goods and services. Divide the nominal GDP by the inflation rate, as determined by the GDP deflator, to arrive at real GDP.

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