Multiple Choice
Using the information above, calculate the inflation rate for 2012 in the United States of Barbeque.
11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)
Nominal GDP and Real GDP
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The United States of Barbeque produces two goods:Hot Dogs and Hamburgers. Use the following information to calculate the GDP Deflator for 2012, assuming the base year is 2010.
A
91.30
B
103.11
C
106.19
D
96.98
Verified step by step guidance1
Calculate the Nominal GDP for 2012 by multiplying the price and quantity of each good and summing the results: Nominal GDP = (Price of Hot Dogs in 2012 * Quantity of Hot Dogs in 2012) + (Price of Hamburgers in 2012 * Quantity of Hamburgers in 2012).
Calculate the Real GDP for 2012 using 2010 prices by multiplying the 2010 prices by the 2012 quantities: Real GDP = (Price of Hot Dogs in 2010 * Quantity of Hot Dogs in 2012) + (Price of Hamburgers in 2010 * Quantity of Hamburgers in 2012).
Use the GDP Deflator formula to find the GDP Deflator for 2012: GDP Deflator = (Nominal GDP / Real GDP) * 100.
Substitute the calculated Nominal GDP and Real GDP values into the GDP Deflator formula.
Simplify the expression to find the GDP Deflator for 2012, which will give you the measure of price level changes from the base year 2010 to 2012.
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