The value of Nominal Income when Real income is Rs. 5000 and GDP deflator is 125 percent will be :
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : Rs. 6,250
To find the nominal income, you should use the following formula :
Nominal Income= (Real Income * GDP deflator)/100
Given :
Real Income = Rs. 5000
GDP Deflator = 125 percent = 125
Nominal Income = (5000*125)/100= 6250