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Consider the following partial economic information for a country where the value of the Gross Domestic...

Consider the following partial economic information for a country where the value of the Gross Domestic Product Deflator (GDPD) is the same as the Consumer Price Index (CPI) and hence generally referred to as the Price Index. The birth rate, mortality rate, and net migrate rate are such that the population growth rate is 0%.

2010
nominal GDP (Billions $): 4486.0
price index: 108
nominal wages ($): 40,000

2011
nominal GDP ($billions): 4710
price index: 112
nominal wages ($): 40,800




[a.] What is the inflation rate for 2011? [3]
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Answer #1

Inflation rate for 2011 will be = (Price Index 2011/Price Index 2010 - 1)*100

=(112/108-1)*100

= 3.703 Percent (Inflation)

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