Question

4.     Suppose the nominal gross national product of Ethiopia in 2010 and 2011 together with the GNP deflator are specified as follows:

Year                           Nominal GNP (in dollar)                   GNP deflator (price index)  

2010                                       8,000,000,000,000                                         100

2011                                       10,000,000,000,000                                       200

                                      

Direction: Based on information provided above, answer questions that follow:

A.   Compute the Real GNP of Ethiopia both for the years 2010 and 2011.

B.    Determine the percentage (%) increase in Nominal GNP in 2011.

C.   Determine the percentage (%) increase in Real GNP in 2011.

D.   In which year there is higher inflation based on the above information? Why? 

Answer 1

Inflation is higher in 2011 because real GNP is lower