87. Real GDP - a calculation

The market value of all final goods and services produced in a given year within the borders of a country, adjusted as to the changes in the general price level (inflation rate) is known as Real Gross Domestic Product. Nominal GDP is the GDP in money terms without the effects of inflation or deflation. One can only arrive at Real GDP, after considering the effects of inflation or deflation. So Real GDP arrives at the actual changes in the quantity of goods and services produced with the effects of inflation (the decrease in the value of money) stripped out. Calculate the real GDP for the year 2000 by using the following figures:

YEAR        NOMINAL GDP       PRICE INDEX

                   ( R million)

1995              175 000                      100 (base year)

2000              200 000                      120

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