Question

Exercise 2.2

• The Republic of Mauritius is an island nation in the Indian Ocean, located about 2,000 kilometres off the southeast coast of the African continent.
• Since its independence from the U.K. in 1968, Mauritius has developed from a low-income, agriculture-based economy to an upper middle-income diversified economy that is based on tourism, textiles, sugar, and financial services.
• In 2019, the country’s nominal GDP was USD 15.678 trillion.
• The nominal GDP is expected to reach USD 13.345 trillion in 2020.
• In comparison, the real GDP of Mauritius in 2019 stood at USD 11.987 trillion.
• The nation’s real GDP is then expected to become USD 12.765 trillion in 2020.   
• Based on the information presented above, calculate the following macroeconomic indicators for years 2019 and 2020.

1. Calculate the GDP price deflator in years 2019 and 2020.                                                                                             

2. Determine the inflation rate based on the changes in the GDP price deflator from year 2019 to year 2020.

3. Compute the nominal GDP growth rate from year 2019 to year 2020.                                              

4. Estimate the real GDP growth rate from year 2019 to year 2020.                                                                            

5. Using your answers in part (c) and (d), re-calculate the inflation rate from year 2019 to year 2020.  

6. Explain why your inflation rate found in part (b) may somewhat differ from the inflation rate in part (e).

Discuss which of the two methods is a superior way of calculating inflation.                                 

Exercise 2.4

• In 2021, the nominal GDP of Scotland was USD 26.678 trillion.
• The nominal GDP is expected to reach USD 23.345 trillion in 2022.
• In comparison, the real GDP of Scotland in 2021 stood at USD 20.987 trillion.
• The nation’s real GDP is then expected to become USD 22.765 trillion in 2022.   
• Based on the information presented above, calculate the following macroeconomic indicators for years 2021 and 2022.

1. Calculate the GDP price deflator in years 2021 and 2022.                                                                                             

2. Determine the inflation rate based on the changes in the GDP price deflator from year 2021 to year 2022.

3. Compute the nominal GDP growth rate from year 2021 to year 2022.                                              

4. Estimate the real GDP growth rate from year 2021 to year 2022.                                                                            

5. Using your answers in part (c) and (d), re-calculate the inflation rate from year 2021 to year 2022.  

6. Explain why your inflation rate found in part (b) may somewhat differ from the inflation rate in part (e).

Discuss which of the two methods is a superior way of calculating inflation.             

Answer 1

It is given that :-
Nominal GDP for 2019 = 15.678 trillion
Real GDP for 2019 = 11.987 trillion
Nominal GDP for 2020 = 13.345 trillion
Real GDP for 2020 = 12.345

(a)




(b)



(c)

(d)