Question

a) What was the value of the GDP deflator in 1999, in 2000 (b) What was the inflation rate in 2000 using the GDP deflator! 9. Tropical Republic produces only bananas and coconuts. The base year is 2010, an tables give the quantities produced and the prices. Quantities Bananas Coconuts 2010 2011 70 bunches SO bunches 40 bunches 60 bunches Prices Bananas Coconuts 2010 $3 a bunch $8 a bunch 2011 $5 a bunch $9 a bunch (a) (4 points) Calculate nominal GDP in 2010 and 2011. (b) (2 points) Calculate real GDP in 2011 expressed in base-year prices. (c) (4 points) Calculate the GDP deflator for 2010 and 2011. (d) (2 points) Calculate the inflation rate in 2011.

Answer 1

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the solution of the above question is,

And 8. DI nominal aop year Real GDP 10770.7 Deflator = GDP - x100 - 1999 Nominal app real app 9353.5 9951.5 2000 1121614 I a) GDP deflater In 1999 = 9353-5 woo -86089 1072017 88.72 12000 2951s xion 11216.4 b) Inflation rate in tuum of UDP Inflation rate = new Deflator app deflaker - old upp deflator - X100 old and deflator 1.88 88 72 - 86.84 8684 *100 86.84 Inflation rate = 0.021649 À 100 = 2016 Ins-as a) nominal UDP: 2 (lwount Price A Cwveent quantities ) quantity Ranana Price quantity coconuts 40 year coconuts $8 $9 Price Banana $3 $5 70 2010 2011 60 - 80 a) Nominal upp 2010 - 13x70) + ( 8100)= 210 + 320 = 530 - Nominal app20u = (5x80) + (angos = 400 + 540 = quo "Real app = { I constant Price x leverent quantity Real UDPdoll = (3x 80) & ( 8 x 60) = 240 + 480 = 720

c) UDP deflator. Nominal app Real GDP 530 2010 530 Roll quo 720 year Real UDP of 2010 is equal to nominal upp because the Base Price is 2010 the real aop of 2010 is same as nominal GPP GO M = Nominal app Real GDP X100 In 2010 = 530 x 100 = 530 100 In 2011 quo 140 x100 = 130.55 1 30 720 d) Inflation rate in sou Inflation rate = new app deflator - cold app deflator old and deflatore x200 : 130:55 - 100 xloo 100 : 30-55-4.