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Economic growth and inflation are two most important macroeconomic factors affecting an economy. The main objective of the macroeconomic policy makers is the high and sustained economic growth with low inflation rate. The relationship between economic growth as measured by GDP; and inflation rate as measured by CPI or GDP deflator; depends on the economic situation of the economy. High economic growth or GDP, without an increase in inflation rate, is possible if the potential output of the economy is growing enough to keep pace with demand. If demand increases continuously, and the productive capacity or GDP does not expand, there is a danger of rapid increase in general price level in the long run leading to high inflation rate in the economy.

Requirement # 1

Suppose an economy produces only two goods; apples and oranges. Calculate the following by using information given in the table.

a. Nominal GDP for year 2010
b. Real GDP for year 2010 by taking 2009 as base year c. GDP deflator for year 2010

page1image17880 page1image18040

Year 2009

page1image21656

Year 2010

Goods

Price (Rs.)

page1image24536

Quantity

Price (Rs.)

page1image27288

Quantity

Apples

200

130

245

160

Oranges

350

150

430

170

Requirement # 2

(Marks: 1.5+1.5+2)

page2image3264

Calculate the cost of basket, Consumer Price Index (CPI), and inflation rate by using information given in the table.

Price (Rs.)

Quantity

Years

Apples

Oranges

Apples

Oranges

Cost of basket

CPI

Inflation rate

2009

200

350

130

150

?

?

----

2010

page2image38864

245

430

page2image41520

160

page2image43536

170

?

page2image46200 page2image46792

?

?

(Marks: 1+1+1+1+1) 

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Replies to This Discussion

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

bhai logo koi idea??

check lec 5 or 6

kisi ne solve kiya ho?

kisi k pas koi solution nhe?

mn abi bna rhi hn bhai

bn gyi ap ke assignment? 

nhi bhia 1st question solve ho gya but 2nd question mn cost of basket ksy krni h wo bta dain than hoga

Ok Vustudent(MBS) I'm waiting .Plz upload solution.I wanna just check some kind of process of solution

plz help me assigenment solution.

question 1 answer:
Year (2010),Nominal GDP (112,300),Real GDP(91,500),GDP Deflator(122.7),
if any confusion chek lec no 5 plz

question no 2 ans
Sol.2
1. The cost of the basket-2009
= 78,500
The cost of the basket-2010
= 112,300
2. The CPI-2009
= 100
The CPI 2010 (base year 2009)
= 143.06
3. Inflation Rate
The inflation rate 2010
= [(143.06-100)/100]*100
=43.06
check lecture no 6 for details

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