Suppose that nominal output rises from $12.5 trillion in 2005 to $13 trillion in 2006. Assume also that the GDP deflator rises from 100 to 105.

a. What is the percentage increase in nominal output?

b. What is the percentage increase in the price index?

c. How much has real output increased (in dollars)?

d. What is the percentage increase in real output?

e. By how much would the price index have had to rise for real income to remain constant?

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