Given the statistics for a small economy called Abua below, derive the GDP deflator and assert if there is evidence of inflation or otherwise.
Real GDP = $650 million
Nominal GDP = $400 million
Inflation rate = 9%
Unemployment rate = 15%
1
Expert's answer
2020-07-09T11:20:21-0400
GDP Deflector="\\frac{Nominal GDP}{Real GDP} \u00d7100=\\frac{400}{650} \u00d7100" =61.538
There is no inflation
The GDP Deflector of 61 percent means the aggregate level of prices reduced by 39 percent from the base year to the current year.
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