A general motors financial analysts needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?

The real gain is 18.2%

Explanation:

Given

GDP in 2000 = $672 billion

GDP in 2010 = $1,69 billion

Interest rate in 2000 = 6.79%

Interest Rate in 2010 = 3.71%

Deflator in 2000 = 24

Deflator in 2000 = 51

Real gain is calculated as follows;

Division of real GDP gain for both years - 1.

To calculate the real GDP gain in 2000 and 2010.

This is calculated by; Nominal GDP/ deflator

In 2000; real GDP gain = $672b/24

Real GDP gain = $28b

In 2010; real GDP gain = $1690b/51

Real GDP gain = $33.1b

Calculating the real gain

Real gain = Real GDP gain in 2010/Real GDP gain in 2000 - 1

Real Gain = $33.1b/$28b - 1

Real Gain = 1.182 - 1

Real Gain = 0.182

Real Gain = 18.2%

Hence, the real gain is 18.2%

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