Question

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories. QUESTION 24 Table 23-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. Year 2008 2009 2010 2011 Price of Waffles $2.00 $2.00 $2.00 $4.00 Prices and Quantities Quantity of Price of Waffles Pancakes 100 $1.00 120 $2.00 150 $3.00 180 $3.00 Quantity of Pancakes 100 150 200 220 Refer to Table 23-6. In 2008, this country's GDP deflator was a. 75. Ob. 100. c. 133.3. d. This cannot be calculated from the information given. Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers S MacBook Pro

Answer 1

In order to calculate the GDP deflator,we need to first calculate nominal and real GDP using the above data.we know that the nominal GDP is the value of all final goods and services produced in an accounting year using the current year market prices.Real GDP is the value of all final goods and services produced in an accounting year at base year prices.

For the year 2008,

_2008 Nominal 67DP 100x2 +100 x 1 > 200 +10o _ = 300 Real 67 DP = 100x2 +100 xe = 200 + 200 oso =400

GOP deflator = Nominal bi DP100 (2008) Real GDP 300 x tots 75
It should be noted that current year prices are used to calculate the nominal GDP and base year prices are used to calculate real GDP.

Hence,Option A is the correct answer as the GDP deflator for the year 2008 is 75.