Using data from Table 19.5 how much of the nominal GDP growth from 1980 to 1990 was real GDP and how much was inflation?

GDP is a measure of economic growth. It shows the value of total goods and services produced in a given period in a region. The nominal GDP does not show the inflation-adjusted measure of GDP. Real GDP shows purely in the volume of output as it is inflation-adjusted and does not take price changes into account.

From 1980 to 1990, the growth in Real GDP can be obtained as,

$$\begin{gathered} =\frac{5979.6-2862.5}{2862.5}\times 100 \\ =\frac{3,117.7}{2862.5}\times 100 \\ =108.8\% \end{gathered}$$

So, the nominal GDP grew by 108.8%.

The inflation from 1980 to 1990 can be measured as,

$$\begin{gathered} \frac{72.7-48.3}{48.3}\times 100 \\ =\frac{24.4}{48.3}\times 100 \\ =50.51\% \end{gathered}$$

This means that out of the 108.8% of nominal growth, 50.51% is the inflation.

The real GDP can be obtained by the ratio of Nominal GDP and GDP deflator.

$$\begin{gathered} \mathrm{For}1980, \\ \frac{2,862.5}{0.483}=5,926.5 \\ \mathrm{For}1990, \\ \frac{5,979.6}{0.727}=8,225.03 \end{gathered}$$

The real GDP growth can be obtained as,

$\frac{8,225.03-5,926.5}{5,926.5}\times 100=38.78\%$