Question

A nation consumes Apples and Oranges in the following amount and price.

	Apples		Oranges
Year	Quantity	Price	Quantity	Price
2011	10	$30	60	$15
2012	15	$70	40	$20

Find out RGDP and NGDP for the year 2011 and 2012. Also find out GDP deflator for the same years. Using GDP deflator, compute the inflation rate of 2012. Use 2011 as the base year.

Answer 1

Solution ‐

Year	QA	PA	QO	PO	RGDP	NGDP	GDP DEFLATOR	Inflation rate
2011	10	30	60	15	QAPA+QO.​​​​​O.PO = 1200	1200	100	0
2012	15	70	40	20	QAPA+QOPO=1050	1850	176.19	76.19

Real GDP 2012 ,we take current year quantity but base year price = (15×30) value of apple +((40×15 ) value of orange = 1050

For Nominal GDP we consider current year quantity and current year price.

GDP deflator = (Nominal GDP/Real GDP)×100

GDP deflator 2012 = ( 1850/1050)×100= 176.19

Inflation rate 2012 =[ (GDP deflator 2012—GDP deflator 2011)/GDP deflator 2011] ×100 = [(176.19—100)/100]×100 =76.19