Asked by Andrea Anguiano on Jul 21, 2024
Verified
Refer to Table 23-6. What was the inflation rate for 2010? Show your work.
Inflation Rate
The frequency at which the overall price of goods and services inflates, reducing the effectiveness of the purchasing capacity.
- Calculate and interpret inflation rates based on changes in the GDP deflator.
Verified Answer
BK
Brissa KorynnaJul 27, 2024
Final Answer :
2009 is the base year so the GDP Deflator is 100.
Nominal GDP was $5x90 + $50x15 = $1,200. Real GDP was $5x90 + $50x15 = $1,200.
The GDP Deflator = 100 x Nominal GDP/Real GDP = 100.
For 2010
Nominal GDP was $5x100 + $60x15 = $1,400. Real GDP was $5x100 + $50x15 = $1,250.
The GDP deflator = 100 x nominal GDP/real GDP = 100 x $1,400/$1,250 = 112.
The inflation rate for 2010 = (2010 GDP Deflator - 2009 GDP Deflator)/2009 GDP Deflator
= (112 - 100)/100 = 12/100 = 12%
Nominal GDP was $5x90 + $50x15 = $1,200. Real GDP was $5x90 + $50x15 = $1,200.
The GDP Deflator = 100 x Nominal GDP/Real GDP = 100.
For 2010
Nominal GDP was $5x100 + $60x15 = $1,400. Real GDP was $5x100 + $50x15 = $1,250.
The GDP deflator = 100 x nominal GDP/real GDP = 100 x $1,400/$1,250 = 112.
The inflation rate for 2010 = (2010 GDP Deflator - 2009 GDP Deflator)/2009 GDP Deflator
= (112 - 100)/100 = 12/100 = 12%
Learning Objectives
- Calculate and interpret inflation rates based on changes in the GDP deflator.