Intermediate Macroeconomics Heman Das Lohano

Q:
Consider an economy that produces and consumes bread and automobiles. In the following
table are data for two different years.

2000 2010
Quantity Price (Rs./unit) Quantity Price (Rs./unit)
Bread 500,000 10 400,000 20
Automobiles 100 50,000 120 60,000

Using 2000 as the base year, compute the following statistics for each year (2000 and 2010):
(a) nominal GDP, (b) real GDP, (c) GDP deflator, (d) a fixed-weight price index such as the
CPI, assuming a fixed basket of year 2000, (e) Report answers to parts (a) to (d) in a table.

Key:

(a) – (d): Solved in manual of Mankiw (2013): Ch.2, Q6a, pp. 7-8

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(e)
Nominal GDP Real GDP GDP Deflator CPI
(Rs.) (Rs.) (Index) (Index)
2000 (base year) 10,000,000 10,000,000 100 100
2010 15,200,000 10,000,000 152 160

Q:
Consider an economy that produces four goods or services. In the following table are data for
two different years. Assume 2017 as the base year.

Product Quantity Price (Rs./unit)

2017 2018 2017 2018
A 5 7 30 40
B 6 4 20 40
C 8 12 15 20
D 3 5 100 110

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(a) Calculate nominal and real GDP for 2017 and 2018.

(b) What is the GDP deflator in 2017 and 2018? What is the annual inflation rate based on
GDP deflator?

(c) What is the annual growth rate of the economy?

(d) Assume that the typical consumer’s basket of goods is given by the average of the quantities
between 2017 and 2018. What is the CPI in 2017 and 2018? What is the annual inflation
rate based on CPI?

(e) Why is GDP deflator inflation rate lower than CPI inflation rate?

Key:
(a)

(b)

(c)

(d)

(e)

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