Question

Use the following information about the economy of Guyana to answer the below question (NOTE - values are in Guyanese dollars):

2017 GDP (in 2017 prices) - $634 billion
2018 GDP (in 2018 prices) - $689 billion

2017 GDP (in 2006 prices) - $407 billion
2018 GDP (in 2006 prices) - $424 billion

2017 GDP per capita (2017 prices) - $817,000
2018 GDP per capita (2018 prices) - $885,000

2017 GDP per capita (2006 prices) - $525,000
2018 GDP per capita (2006 prices) - $544,000

2017 CPI - 114.8
2018 CPI - 116.2

How much higher was the 2018 inflation rate as measured by GDP deflator than the 2018 inflation rate as measured by CPI?

(Put your answers in PERCENT form WITHOUT the percent sign. Answers should be rounded to 1 decimal place.)

Answer 1

(I) For GDP deflator, base year is 2006.

GDP deflator = (nominal GDP / real GDP) x 100

Nominal GDP, 2017 = 634

Ral GDP, 2017 = 407

GDP deflator, 2017 = (634 / 407) x 100 = 155.77

Nominal GDP, 2018 = 689

Ral GDP, 2018 = 424

GDP deflator, 2017 = (689 / 424) x 100 = 162.5

Inflation rate = % Change in GDP deflator = (162.5 / 155.77) - 1 = 1.043 - 1 = 0.043 = 4.3%

(II) With CPI,

Inflation rate = % Change in CPI = (116.2 / 114.8) - 1 = 1.0412 - 1 = 0.012 = 1.2%

(III) Difference (%) = 4.3 - 1.2 = 3.1