. The CPt stood at 1 U UVer the year. Today the CPI is actually 179.5 rate on th

Question

. The CPt stood at 1 U UVer the year. Today the CPI is actually 179.5 rate on the loan and the real interest rate on the loan. (S 4. Citizens of th e country of Vedderland produce avocados and provide entertainment services eie playing). In one year they produced $15 million worth of avocados, with S11 million consumed domestically and the other $4 million sold to neighboring countries, hey po 7 million worth of ukulele-playing services, $5 million in Vedderland, and $2 miliot es neighboring countries. They purchased $6 million worth of bee Calculate the magnitudes of GNP, GDP, net factor payments from abroad, net expor rovided r from neighboring countries abroad, current account balance for Vedderland. (10 points) 5. The country of Myrule has produced the following q uantity of gauges and potatoes Year s 2 gn Quantity PriceQuantity Price 10,000 $3 Gauges 8,000 Potatoes 6000$8 5000 $14 a. Using Year 1 as the base year, what is the growth rate of real GDP from Year 1 b. Based on the GDP deflator, what is the inflati to Year 2? (5 points) Based on the GDP deflator, what is the inflation rate from Year 1 to Year 2? (5 coWhy do conmise ten a given year, a country's GDP $3843, net factor payments from abroad $191, taxes- nsfers received from the government $422, interest payments on the government's deb 56, consumption $3661, and government purchases $338. Calculate the values of pr concentrate on changes in real magnitudes? (5 points)

Explanation / Answer

Ans. 5 . Let us start with the Calculation of Nominal GDP , we know that Nominal GDP = Current Quantity × Current Prices. So,

Nominal GDP for Year 1 = (8000×4) + (6000×8) = $80000

Nominal GDP for Year 2 = (10000×3) + (5000×14) = $100000

Now if Year 1 is taken as Base Year , then in Year 1 , Nominal GDP = Real GDP = $80000

Real GDP in Year 2 = (10000×4*) + (5000×8*) = $80000

* - Price of Base Year

a) We can clearly see that Real GDP is same in Year 1 and Year 2 . Hence Real GDP does not grow.

b) We'll find the GDP deflator of both the Years

GDP deflator = Nominal GDP / Real GDP × 100

Deflator at Year 1 = 100%

Deflator at Year 2 = 100000/80000 ×100 = 125%

So the GDP Deflator increased by 25% in Year 2 ( 125 - 100 )

Hence Inflation Rate from Year 1 to Year 2 = 25%

I hope you understood the answer. Do ask in case of doubts.

Best of Luck !! Keep Chegging !!

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