Question

In: Economics

Assume final goods produced in country AAA in 2017,2018,and 2019 and their prices are shown as follows: ...

Assume final goods produced in country AAA in 2017,2018,and 2019 and their prices are shown as follows:

Year	Product A quantity	Product A price	Product B quantity	Product B price
2017	1000	10	750	15
2018	2500	30	3000	35
2019	5000	40	5500	45

Calculate nominal GDP in years 2017, 2018, and 2019.
Calculate Real GDP for years 2017,2018, and 2019 using Year 2017 as the base year.
Using the real GDP figures calculated in (b) above, calculate annual growth rate of output for years 2018 and 2019.
Calculate GDP deflator for years 2017I to 2019 using Year 2017 as the base year.
Calculate CPI price index for years 2017 to 2019 using Year 2017 as the base year.
Calculate inflation rate for years 2018 and 2019 using both GDP deflators and CPI indexes calculated in parts (d) and (e).

Solutions

Expert Solution

Here,

Year	Product A	Product A Price	Product B	Product B Price
2017	1000	10	750	15
2018	2500	30	3000	35
2019	5000	40	5500	45

So Nominal GDP for 2017 = 1000*10+ 750*15 = 21250

Similarly Nominal GDP for 2018 = 180000

Similarly Nominal GDP for 2019 = 475000

For Real GDP Prices of 2107 are considered so table looks like below

Year	Product A	Product A Price	Product B	Product B Price
2017	1000	10	750	15
2018	2500	10	3000	15
2019	5000	10	5500	15

So Real GDP for 2017 = 1000*10+ 750*15 = 21250

Similarly Real GDP for 2018 = 70000

Similarly Real GDP for 2019 = 132500

Outpur Growth Rate using Real GDP

For 2018 = 70000/ 21250 = 329.4118%

For 2019 = 132500/ 70000 = 189.2857%

GDP Deflator For 2018 = Nominal GDP for 2018/ Real GDP for 2018 = 180000/ 70000 * 100 = 257.1429

GDP Deflator For 2019 = Nominal GDP for 2019/ Real GDP for 2019 = 475000/ 132500 * 100 = 358.4906

Price in 2017 = 10 + 15 = 25

Price in 2018 = 30+35 = 65

Price in 2019 = 40+45 = 85

CPI in 2018 = 65/25*100 = 260

CPI in 2019 = 85/25*100 = 340

Inflation using CPI

2018 = 260/100*100 = 260%

2019 = 340/260*100 = 130.7692%

Inflation Using GDP Deflator

2018 =(257.1429 - 100)/100*100 = 157.1429

2019 =(358.4906 - 257.1429)/ 257.1429*100 = 39.143

Rahul Sunny answered 6 months ago

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