Question

Suppose that in 1991 the total output in a single-good economy was 13,689 chickens. Also suppose that in 1991 each chicken was priced at $19. Finally, assume that in 1995 the price per chicken was $11 and that 19,561 were purchased.

For each of the following parts, assume that 1991 is the base year.

Note: Please round your answers to two decimal places.

a) Determine the GDP Deflator for 1995

Answer 1

$GDP price deflator=(\frac{nominalGDP}{realGDP})∗100$

Nominal GDP is the current market prices while Real GDP is the market prices of the base year

$Nominal GDP =11 \times 19561$ =215171

$Real GDP=19 \times 13689$ =260091

GDP price deflator for $1995=215171/260091 \times 100$ =82.73