Here is a table showing the outputs of Atlantis in recent years (all prices are
ID: 1224866 • Letter: H
Question
Here is a table showing the outputs of Atlantis in recent years (all prices are in Atlantis Dollars): Year Banana Unit Price Boat Unit Price Aircraft Unit Price 2010 5, 600, 000 1 3, 500 1, 000 1 5, 000, 000, 000 2011 6, 400, 000 2 4, 000 1, 500 2 5, 000, 000, 000 2012 7, 200, 000 3 4, 000 2, 000 3 5, 000, 000, 000 2013 6, 000, 000 4 3, 000 2, 500 4 5, 000, 000, 000 The regular consumer in Atlantis consumes 500 bananas and 1 boat per year, which is the bundle for CPI calculation. Taking 2010 as the base year, calculate the GDP deflator measured inflation for year 2011, 2012 and 2013. Taking 2013 as the base year, calculate the GDP deflator measured inflation for year 2011, 2012 and 2013. Taking 2010 as the base year, calculate the CPI measured inflation for year 2011, 2012 and 2013. Taking 2013 as the base year, calculate the CPI measured inflation for year 2011, 2012 and 2013.Explanation / Answer
(1) Year 2010:
Nominal GDP:
Bananas $1x5, 600,000 + Boat $1,000 x 3,500 + Aircraft $5,000,000,000 x 1
Nominal GDP = $5,009,100,000.
The real GDP for the year 2010 is the same as nominal GDP.
Year 2011: (2010 base yer)
Nominal GDP: $2x 6,400,000 + $1,500x4,000 + 5,000,000,000x 2
Nominal GDP = $12,800,000 + $6,000,000 + $10,000,000,000
Nominal GDP for 2011 = $10,018,800,000
Real GDP at 2010 prices: $1x6,400,000 + $1,000x4,000 + $5,000,000,000x2
Real GDP = $6,400,000 + 4,000,000 + $5,000,000,000
Real GDP = $5,010,400,000
GDP deflator for 2011 = Nominal GDP / Real GDP x 100
GDP deflator = 199.96
Year 2012:
Nominal GDP: $3x7,200,000 + $2,000x4000 + $5.000,000,000x3
Nominal GDP = $21,600,000 + $8,000,000 + $15,000,000,000
Nominal GDP = $15,029,600,000
Real GDP: $1x7,200,000 + $1,000x4,000 + $5,000,000,000x3
Real GDP = $7,200.000 + 4,000,000 + 15,000,000,000
Real GDP= $15,011,200,000
GDP deflator for 2012 = $15,029,600,000 / 15,011,200,000 x 100
GDP deflator = 100.12
Year 2013:
Nominal GDP = $4x6,000,000 + $2,500x3,000 + $5.000,000,000x4
Nominal GDP = $24,000,000 + $7,500,000 + $20,000,000,000
Nominal GDP = $20,031,500,000
Real GDP = $1x6,000,000 + $1,000x3,000 + $5,000,000,000x4
Real GDP = $6,000,000 + $3,000,000 + $20,000,000,000
Real GDP = $20,009,000,000
GDP deflator for 2013 = $20,031,500,000 / 20,009,000,000 x 100
GDP deflator for 2013 = 100.11.
(2) Taking 2013 as base year:
Nominal GDP for 2011 = $10,018,800,000
Real GDP = $4x6,400,000 + $2,500x4,000 + $5,000,000,000x2
Real GDP = $25,600,000 + $10,000,000 + $10,000,000,000
Real GDP = $10,035,600,000
GDP deflator for 2011 = 10,018,800,000 / 10,035,600,000 x 100
GDP deflator for 2011 = 99.83.
Nominal GDP for 2012 = $15,029,600,000
Real GDP = $4x7,200,000 + $2,500x4,000 + $5,000,000,000x3
Real GDP = $38,800,000 + $10,000,000 + $15,000,000,000
Real GDP = $15,048,800,000
GDP deflator for 2012 = $15,029,600,000 / $15,048,800,000 x 100
GDP deflator for 2012 = 99.87.
Nominal GDP for 2013 = $20,031,500,000
Since the base year is the same, the GDP deflator is 100.
(3) CPI for 2011, 2012, and 2013 taking 2010 as base year:
CPI for the year 2011 = $10,018,800,000 / $5,009,100,000 x 100
CPI for year 2011 = 200.01
CPI for the year 2012 = $15,029,600,000 / $5,009,100,000 x 100
CPI for the year 2012 = 300.04
CPI for the year 2013 = $20,031,500,000 / $5,009,100,000 x 100
CPI for the year 2013 = 399.90.
(4) Taking 2013 as base year:
CPI for the year 2011 = $5,009,100,000 / $20,031,500,000 x 100
CPI for the year 2011 = 25.00
CPI for the year 2012 = $10,018,800,000 / $20,031,500,000 x 100
CPI for the year 2012 = 50.01
CPI for the year 2013 is 100, since it is chosen as the base year.
*****