Country A produces only two goods; food and fuel. The below table gives price and quantity data for the economy for thre
Posted: Thu May 19, 2022 8:31 am
Country A produces only two goods; food and fuel. The below
table gives price and quantity data for the economy for three
years.
Year | Price of Food | Quantity of Food | Price of Fuel |
Quantity of Fuel
2018 €5 200 €10 120
2019 €5 220 €11 150
2020 €5.50 250 €11.50 200
ii) Use the information given to calculate nominal GDP for the
economy in each year. [10 marks]
iii) Using 2018 as the base year, calculate real GDP for the
economy in each year. [10 marks]
iv) Calculate the GDP deflator for 2019 and 2020. Use the GDP
deflator to calculate inflation each year. [15 marks]
Inflation rates in Ireland are calculated using either the
Consumer Price Index (CPI) or the GDP Deflator.
v) For each of the following price changes in the economy what
happens (if anything) to the inflation rate as measured by the CPI,
and what happens (if anything) to the inflation rate as measured by
the GDP deflator? Briefly explain your answers.
a. Due to a shortage of workers in the sector, hairdressers
increase the price of haircuts
b. A new public sector pay deal is negotiated and the salaries
of public servants are increased
c. Excise duty on wine is increased and the price of wine
therefore increases [15 marks]
The Central Bank in Westeros engages in open market operations
and sells bonds to the non-banking sector.
table gives price and quantity data for the economy for three
years.
Year | Price of Food | Quantity of Food | Price of Fuel |
Quantity of Fuel
2018 €5 200 €10 120
2019 €5 220 €11 150
2020 €5.50 250 €11.50 200
ii) Use the information given to calculate nominal GDP for the
economy in each year. [10 marks]
iii) Using 2018 as the base year, calculate real GDP for the
economy in each year. [10 marks]
iv) Calculate the GDP deflator for 2019 and 2020. Use the GDP
deflator to calculate inflation each year. [15 marks]
Inflation rates in Ireland are calculated using either the
Consumer Price Index (CPI) or the GDP Deflator.
v) For each of the following price changes in the economy what
happens (if anything) to the inflation rate as measured by the CPI,
and what happens (if anything) to the inflation rate as measured by
the GDP deflator? Briefly explain your answers.
a. Due to a shortage of workers in the sector, hairdressers
increase the price of haircuts
b. A new public sector pay deal is negotiated and the salaries
of public servants are increased
c. Excise duty on wine is increased and the price of wine
therefore increases [15 marks]
The Central Bank in Westeros engages in open market operations
and sells bonds to the non-banking sector.