a)Nominal and Real GDP in all three years.
Nominal GDP=(Units Produced in a Year)× (Price in a Year)
For 2018: =(500×1.00)+(300×5.00)+(300×0.70)=2210
For 2019: =(600×1.00)+(200×10.00)+(400×0.80)=2920
For 2020: =(590×1.05)+(210×5.00)+(420×0.75)=3045
Real GDP:
is equal to the sum of the base year price×current year quantity of all the goods.
For 2018: =(500×1.00)+(300×5.00)+(300×0.70)=2210
For 2019: =(600×1.00)+(200×5.00)+(400×0.70)=1880
For 2020: =(590×1.00)+(210×5.00)+(420×0.70)=1934
b)Real economic growth rate in 2020
=((Real GDP20 -Real GDP19 )÷ Real GDP19 ))× 100
=18801934−1880×100=2.87%
c)Calculate CPI in all three years.
CPI= (Current year cost ÷ Base year cost) × 100
CPI18=(5×1.00)+(3×5.00)+(3×0.7)(5×1.00)+(3×5.00)+(3×0.7)×100=100
CPI19=(5×1.00)+(3×5.00)+(3×0.7)(5×1.00)+(3×10.00)+(3×0.8)×100=169.2
CPI20=(5×1.00)+(3×5.00)+(3×0.7)(5×1.05)+(3×10.05)+(3×0.75)×100=176.5
d)Inflation rate in 2020
CPI19CPI20−CPI19×100=169.2176.5−169.2×100=4.3%
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