Consider an economy that produces and consumes apples and oranges. In the table
ID: 1141933 • Letter: C
Question
Consider an economy that produces and consumes apples and oranges. In the table below are data for two different years. 5. Price of Apples (per Price of Oranges (per kg) Apples Produced (kg) Oranges Produced (kg) Year 2000 $1.00 S0.75 1000000 1250000 2010 $5.00 $3.00 1500000 1500000 kg) Using the year 2000 as the base year, compute nominal GDP, real GDP and the GDP deflator (implicit price deflator) for both years. (1 point) Calculate inflation rate (by what percentage has price changed?) (1 point) Compute a fixed-weight price index such as CPI in 2010 (2 points) a. b. c.Explanation / Answer
Amswer:- (a) Nominal GDP in year 2000 = 2,250,000
Nominal GDP in year 2001 = 12,000,000
Real GDP in Year 2000 = 2,250,000
GDP Deflator in 2000 = Nominal GDP 2000/REAL DGP 2000 *100
= 100
Real GDP in year 2001 = 2,625,000
GDP Deflator in year 2001 = 457.14
(b) Inflation = (457.14- 100)/100 *100 = 357.14%
(c) CPI = 8/1.75 * 100 = 457.14