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Economics - Financial Markets 15 Online
OpenStudy (anonymous):

Can someone explain to me the reasoning behind this question, please? "A country reported a nominal GDP of $115 billion in 2006 and $125 billion in 2005; it reported a GDP deflator of 85 in 2006 and a deflator of 100 in 2005. Between 2005 and 2006..." It says the answer is that the "...real output rose and the price level fell", but I don't understand why. I can understand why the price level fell, sine the GDP deflator appears to fall over the next year, but I don't understand why the real output would rise. Please help, thank you!

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