In: Economics
Assume that is produced only two products; Coffee bean and plastic where are the price and quantity produced are:
Year | Coffee bean | Plastic |
2018 (base year) | P= 10 Q= 1,000 | P= 5 Q= 2,000 |
2019 | P= 10 Q= 1,100 | P= 5 Q= 2,100 |
2020 | P= 12 Q= 900 | P= 6 Q= 1,900 |
Calculate GDP deflator for the years 2018, 2019 and 2020. Also, calculate the Nominal and real GDP growth on 2019 & 2020, compare between them by explaining why they are different. Calculate the 2019 & 2020 inflation rates.
Formulas used in the table are the following:
Real GDP = Base Year Price*Output
Nominal GDP = Current Year Price*Output
GDP Deflator = Nominal GDP/Real GDP
Inflation Rate = (Current Year GDP Deflator/Previous Year GDP Deflator) – 1:
Real GDP Growth Rate = (Current Year Real GDP/Previous Year Real GDP) – 1
Nominal GDP Growth Rate indicates the % increase in the Nominal GDP:
Nominal GDP Growth Rate = (Current Year Nominal GDP/Previous Year Nominal GDP) – 1
Year | Coffee bean | Plastic | Real GDP | Nominal GDP | GDP Deflator | Inflation Rates | Real GDP Growth Rate | Nominal GDP Growth Rate |
2018 (base year) | P= 10 Q= 1,000 | P= 5 Q= 2,000 | 20000 | 20000 | 1 | |||
2019 | P= 10 Q= 1,100 | P= 5 Q= 2,100 | 21500 | 21500 | 1 | 0% | 7.5% | 7.5% |
2020 | P= 12 Q= 900 | P= 6 Q= 1,900 | 18500 | 22200 | 1.2 | 20% | -13.95% | 3.26% |