Answer to Question #136901 in Macroeconomics for amna

Question

1. Compute nominal GDP in each year using 2017 as the base year.

2017 2018 2019

price/unit Total quantity price /unit total quantity price total quantity

good A 30 900 35 1,000 34 1,050
good B 120 192 140 200 136 205
good C 95 450 85 750 102 550


Question No 2: compute the GDP deflator in each year and Use it compute the inflation rate from 2017 to 2018, and from 2018 to 2019.

Question No 3: On the basic of data provided, Use 2018 as base year and
compute (CPI) for each year. Compare the results of inflation rates computed in Qus No 2 and 3.

Answer 1

1. Nominal GDP

2017: $(30*900)+(120*192)+(95*450)= 92790$

2018 :$(35*1000)+(140*200)+(85*750)=126750$

2019: $(34*1050)+(136*205)+(102*550)=119680$

2.GDP deflector and inflation rate

2017:$\frac{92790}{92790}*100=100\%$

2018: $\frac{126750}{92790}*100=136.599 \%$

2019: $\frac{119680}{92790}*100=128.979 \%$

inflation rate:

2018: $[136.599-100 ]\over 100$ =0.36599

2019 :$[128.979-100]\over 100$ =0.28979

3.computing CPI using 2018 as base year

CPI=$base ~year~quantities *current~year~ price\over base~year ~basket~ quantities *base~year~price$ *100

using 2018:

2017:$92790 \over 126750$ =0.73207

2019:$119680 \over 126750$ =0.94422

CPI is higher than inflation rate