Question

Refer to Table 10-6 below. Calculate this country's GDP Deflator for each of the following years,...

Refer to Table 10-6 below. Calculate this country's GDP Deflator for each of the following years, 2008, 2009, 2010 and 2011.

Year Price of Waffles Quantity of Waffles Price of Pancakes Quantity of Pancakes

2008

(Base Year)

 $2 100 $1 100
2009 $2 120 $2 150
2010 $2 150 $3 200
2011 $4 180 $3 220
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Answer #1

Note that Nominal GDP for any year = price x quantity for waffles + Price x quantity for pancakes for the current year price and current year quantity

Real GDP = price x quantity for waffles + Price x quantity for pancakes for base year price and current year quantity

GDP deflator = Nominal GDP / Real GDP.

Waffles Pancakes
Year Price Quantity Price Quantity Nominal GDP(million Real GDP (base 2009)(million) GDP deflator = Nominal GDP/Real GDP
2008 2 100 1 100 300 300 100.00
2009 2 120 2 150 540 390 138.46
2010 2 150 3 200 900 500 180.00
2011 4 180 3 220 1380 580 237.93
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