Question

Between 2015 and 2016, the country of South Dantoine experienced a growth rate of -0.3%. If nominal GDP had increased by 3.1% and the population growth was recorded as 0.7%, then calculate the annual inflation rate in South Dantoine.

Answer 1

The annual inflation rate in South Dantoine between 2015 and 2016 was calculated to be 2.7%, after adjusting the nominal GDP growth for population growth and the negative real GDP growth rate.

Step-by-step explanation:

To calculate the annual inflation rate in South Dantoine between 2015 and 2016, we need to consider the nominal GDP growth and the population growth data provided. The nominal GDP increased by 3.1%, while the population grew by 0.7%. However, the country experienced negative growth in its real GDP, which means the actual production of goods and services decreased when not considering inflation.

First, we adjust the nominal GDP growth for the population increase to find the real GDP growth per capita. This is done by subtracting the population growth from the nominal GDP growth: 3.1% - 0.7% = 2.4%. Next, we compare the real GDP growth per capita to the actual economic contraction of -0.3% to find the inflation rate.

The formula for inflation rate is then: Inflation Rate = Nominal GDP Growth - Real GDP Growth. We use our adjusted real GDP growth per capita (2.4%) and the economic contraction (-0.3%) as the real GDP growth rate to solve for the inflation rate: Inflation Rate = 2.4% - (-0.3%) = 2.7%.

Therefore, the annual inflation rate in South Dantoine between 2015 and 2016 was 2.7%.

Answer 2

inflation rate = 3.41%

Step-by-step explanation:

real growth rate = (real GDP 2016 / real GDP 2015) - 1 = -0.3%

if we use 2015 as our base year, its real GDP = 100

so 2016 real GDP = 99.7

real GDP is nominal GDP adjusted for inflation:

in this case, 2016 nominal GDP = 100 + nominal growth = 100 + 3.1 = 103.1

GDP deflator = 103.1 / 99.7 = 1.0341

inflation rate = deflator - 1 = 1.0341 - 1 = 0.0341 or 3.41%

Since we are calculating GDP, not GDP per capita, the increase in population is not relevant here.