Question

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Consider an economy that produces only three types of fruit: apples bananas, and oranges. In the base year (a few years ago), the production and price data are listed in the tables to the right. Base Year Quantity Fruit Apples Bananas 5,000 bunches Oranges Price 3,000 bags In the base year, nominal GUP was s In the current year, nominal GDP is $ (Round both answers to the nearest whole number.) $2 per bag $3 per bunch $5 per bag 6,000 bags The percentage increase in nominal GDP since the base year is 1 % (Enter your response as a percentage rounded to one decimal place.) Current Year Quantity Fruit Apples Bananas 13,000 bunches Oranges Price 4,000 bags In the base year, real GDP was $ In the current year, real GDP is (Round both answers to the nearest whole number.) $3 per bag $2 per bunch $7 per bag 24,000 bags The percentage increase in real GDP since the base year is | |%. (Enter your response as a percentage rounded to one decimal place.) The GDP deflator for the base year is The GDP deflator for the current year is (Round both answers to one decimal place.) The inflation rate (which equals the percentage increase in the GDP deflator) since the base year is 1 %. Enter your response as a percentage rounded to one decimal place.) The percentage increase in nominal GDP in this economy since the base year is due primarily to

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Answer 1

2.

Base Year
Fruit	Quantity	Price
Apples	3000	2
Bananas	5000	3
Oranges	6000	5
Nominal GDP in Base Year		51000

Current Year
Fruit	Quantity	Price
Apples	4000	2
Bananas	13000	3
Oranges	24000	7
Nominal GDP in Current year		215000

The percentage increase in Nominal GDP is ((215000-51000)/51000)*100 = 321.6 percent

In the base year, real GDP was 51000

Current Year
Fruit	Quantity	Price
Apples	4000	2
Bananas	13000	3
Oranges	24000	5
Nominal GDP		167000

In the base year, real GDP was 167000.

The percentage increase in Real GDP is ((167000-51000)/51000)*100 = 227.5 percent

The GDP deflator for the base year is 100

The GDP deflator for the current year is Nominal GDP/Real GDP = (215000/167000)*100 =128.7

The inflation rate is 128.7-100 = 28.7 percent

Is primarily due to increase in price of Oranges

3.

Year	CPI	Bond Value	Nominal Interest rate
2015	200	500
2016	202	525	=(202-200))/200)*100=5%

Actual inflation rate = ((202-100)/100)*100 = 102 percent

Real interest rate = Nominal – Inflation = 5%-2% =3%

Expected inflation rate = 1%

Expected real interest rate = 5%-1%=4%