Question

A country's real gdp rose from $500 to $530 while its nominal gdp rose from $600 to $700. what was this country's inflation rate?

Answer 1

To calculate the inflation rate, divide the percentage increase in nominal GDP by the percentage increase in real GDP and multiply by 100. In this case, the inflation rate is 83.3%.

Step-by-step explanation:

To calculate the inflation rate, we need to compare the percentage increase in nominal GDP with the percentage increase in real GDP.

In this case, nominal GDP rose by $100 ($700 - $600) and real GDP rose by $30 ($530 - $500). Therefore, the inflation rate can be calculated as the percentage increase in nominal GDP divided by the percentage increase in real GDP, multiplied by 100.

Inflation rate = ($100/$600) / ($30/$500) x 100 = 83.3%.

Answer 2

Answer: 10%

Explanation:

`Real GDP_(1) = 500 Real GDP_(2) = 530  Nominal GDP_(1) = 600 Nominal GDP_(2) = 700`

GDP Deflator 1 =
`(600)/(500) * 100= 120`

GDP Deflator 2 =
`(700)/(530) * 100= 132`

Inflation = % Change in GDP Deflator

`= (132-120)/(120) * 100 = (12)/(120) * 100 = 10%`

Thus, the inflation rate is 10%.