BC200407151

Malik Asif Mehmood

ECO403 Assignment # 1
QUESTION # 1
Suppose an economy produces only two goods; apples and mangoes. Calculate the
following by using information given in the table.
a. Nominal GDP for year 2021.
b. Real GDP for year 2021 by taking 2020 as base year.
c. GDP deflator for year 2021.
Year2020 Year2021
Goods Price (Rs.) Quantity Price (Rs.) Quantity
Apples 250 120 260 140
Mangoes 260 130 310 150

Solution:
a) Nominal GDP for year 2021:

Multiply Ps & Qs from same year:

= [2021 Price (Apple) × 2021 Quantity (Apple)] + [2021 Price (Mango) × 2021
Quantity(M)]
= (260 × 140) + (310 × 150)
= 35,400 + 46,500
=82,900 Rs
b) Real GDP for year 2021 by taking 2020 as base year.

Multiply 2021 year’s Qs by 2020 Ps

= (250 × 140) + (260 × 150)
=35,000 + 39,000
= 74,000 Rs
c) GDP Deflator for year 2021.

Nominal GDP
GDP Deflator = ×100
Real GDP

82,900
= ×100
74 , 000
= 1.120 × 100
= 112.02 % Ans
QUESTION # 2
Calculate the cost of basket, Consumer Price Index (CPI), and inflation rate by using
information given in the table.

Price Rs. Quantity

Years Apple Mangoes Apples Mangoe Cost of CPI Inflation
s basket Rate
2020 250 300 120 130
2021 260 310 140 150

Solution:

1. a) Cost of Basket 2020 = (120 × 250) + (130 × 300)

=30,000 + 39,000
= 69,000 Rs

b) Cost of Basket 2021 = (140 × 260) + (150 × 310)

= 36,400 + 46,500
= 82,900 Rs

2. a) CPI 2020
69,000
¿ ×100
69,000
= 69,000/69,000 x 100
= 100 Rs

b) CPI2021
82,900
¿ ×100
69,000
= 82,900 / 69,000 x 100
= 120.1 Rs

3. Inflation 2021
120.1−100
Inflation ¿ ×100
100
20.1
= ×100
100
= 0.201 x 100
= 20.1 % Ans

Price Rs. Quantity

Years Apple Mangoes Apples Mangoes Cost of CPI Inflation
basket Rate
2020 250 300 120 130 69,000 100 ……
2021 260 310 140 150 82,900 120.1 20.1