The tables below show data for Country C and Country D.
Country C Country D
Year GDP Deflator Population Nominal GDP Year GDP Deflator Population Nominal GDP
1 100 12 $180 1 100 8 $200
2 115 10 $230 2 120 10 $300
A. Calculate each of the following for Year 2. Show your work.
i. Real GDP per capita for Country C
ii. Real GDP per capita for Country D
B. Calculate each of the following in Year 2. Show your work.
i. The inflation rate in Country C
ii. The inflation rate in Country D
C. Based on your answer to Part C, if the nominal interest rate is the same for both countries in Year 2, which country experiences the higher real interest rate in Year 2? Explain.
D. Assume loans in Country C were made taking into account an expected inflation rate if 15%. Will borrowers in Country C be better off, worse off, or not affected after they realize the actual inflation rate calculated in Part Ci? Explain.