Question

Suppose for the year 2013 the economy of Uplandia has a nominal GDP of ​$6,700 billion and a real GDP of ​$6,030 billion. For​ 2013, this​ economy's GDP deflator is 111.1. ​(Round your response to one decimal place​.) Now suppose the GDP deflator in 2012 was 99.1. ​Uplandia's year-over-year inflation rate is _________ percent. ​(Round your response to one decimal place​.)

Answer 1

The inflation for 2013 is 11.1% and for 2012 is -0.9% ( Deflation of 0.9%).

Step-by-step explanation:

The inflation rate for 2013 is 11.1% we calculate it by using the GDP deflator for 2013 of 111.1 which the formula for the GDP deflator = (real GDP)/(nominal GDP) x100, in which we see that the difference between Real GDP and Nominal GDP is the inflation rate where in this problem we will say 111.1 - 100 = 11.1% that is the inflation rate for this year.

Now to further calculate the inflation rate for 2012 we will say 99.1 -100 =-0.9% , which this year prices decreased instead of increasing therefore there was a deflation.