Question

Part 2 - Problems (40 pts) 1. Here below you have the typical consumption basket of a random (but awesome) country. (10 pts) 2018 Quantity 2019 Quantity 5 Ice-cream 2018 Price $5 $15 2019 Price $6 $20 4 2 1 "The Incredibles" Movie Tickets Jeans $50 1 $55 1 a) Calculate the inflation between 2018 and 2019. You can use whatever method you want, but you should tell me which method you are using, explain and show your steps.

Answer 1

Soin: the dala genen м 2018 Pr 2019 A 2018 Q. 4 20190 Doc Cycom Movie ticket 2. #20 1 Jeans $50 1 $55 1 going tə calculate inflation sale by using GDP deflator G DP deflator Nominal GAP peal GDP W100. Year Nominal GDP GDP Deflator Real GDP 4X5 of 2*15 +1450 = $ 100 2018 100 X800-100 54 of 15*2 + 50) = $ 100 2019 545 + 1815 +1450 105x100 6 * 5+ 20 */ 55101 = $105 = $ 90 90 =$116.67 For example, to calculate Nominal GAP in 2018, = (Price of 2018 * & Of 2018 ) of a each products And to calculate Real GAP, 2018 - current year quantity & Base year price. (sence dels lake 2016 as Base years 50 Nominal GDP 20 = x + 5+ 2x^2 + 7x $ 50 = $100 Real GDP 2018 471 $ $ # 2:$15 f 1*$50 = $100. Both are same in this case 2018

But to calculate Real GDP in 2013 Real GAP 2019 Current year quantity & Base year price for constant price ). 57 $5 of $15 + 1 $50 $90 f Current y Current year price 51$ Gof in $ 20 of in$55 $ 105 Reflakes . 80, Rea cap in 2019 = Nominal GOP 2014 105 20/00 90 Real GDP 2019 $ 116.67 And GDP Reflater in 2018 - 100 1100 $100 . 20. Inflation Rete GDP oef ta for 2019 - GP Proeflator 2018 x100 « Defcatos 2018 in 2019 GA V100 $116.67 - $100 $ 100 16.67 0.0 100 16.67% So, Anneal Inflation rate in 2019 al 2018 prices is 16.67%; which means prices how increased 16 671. than the last year.