ECO 403 Assignment Solution
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Danyal RaoECO 403 Assignment Solution
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Danyal RaoName: Hafiz Rao Danyal Ali
Student ID: BC190403385
ECO 403: Assignment Solution
So we compute the value as given first information:
(i) Nominal GDP for the years 2022, 2023, and 2024
Years Quantities Prices
Oranges Coconuts Oranges Coconuts
2022 50 500 100 50
2023 150 250 110 40
2024 1000 600 200 90
As a Nominal GDP is calculated,
Nominal GDP = (Quantity * Price) for current year
Year 2022:
Oranges = 50 * 100 = 5,000
Coconuts = 500 * 50 = 25,000
So the Nominal GDP of year 2022 = 5,000 + 25,000 = 30,000
Year 2023:
Oranges = 150 * 110 = 16,500
Coconuts = 250 *40 = 10,000
So the Nominal GDP of year 2023 = 16,500 + 10,000 = 26,500
Year 2024:
Oranges = 1000 *200 = 200,000
Coconuts = 600 * 90 = 54,000
So the Nominal GDP of year 2024 200,000 + 54,000 = 254,000
(ii) So we compute the value as per 2nd information:
Real GDP (using 2022 as a base year) for the years 2022, 2023, and 2024
Years Quantities Prices
Oranges Coconuts Oranges Coconuts
2022 50 500 100 50
2023 150 250 110 40
2024 1000 600 200 90
So let’s calculate the Real GDP uses the prices from the base year (2022):
Real GDP = (Quantity * Price) base year (2022)
Year 2022:
Oranges = 50 * 100 = 5,000
Coconuts = 500 * 50 = 25,000
So the Real GDP of year 2022 = 5,000 + 25,000 = 30,000
Year 2023:
Oranges = 150 * 100 = 15,000
Coconuts = 250 *50 =12,500
So the Real GDP of year 2023 = 15,000 + 12,500 = 27,500
Year 2024:
Oranges = 1000 * 100 = 100,000
Coconuts = 600 * 50 = 30,000
So the Real GDP of year 2024 = 100,000 + 30,000 = 130,000
(iii) So we compute the value as per 3rd information:
GDP Deflator for the years 2023 and 2024
As we know GDP Defaulter = (Nominal GDP / Real GDP)*100
So GDP Defaulter of the year 2023:
= (26,500 / 27,500) *100 = 96.36
And the GDP Defaulter of the year 2024:
= (254,000 / 130,000) * 100 = 195.38
(iv) So we compute the value as per 4th information:
Inflation Rate for the years 2023 and 2024:
As we know that:
Inflation Rate = ((GDP Defaulter of current year – GDP Defaulter of Previous year) /
GDP Defaulter of previous year) *100
To calculate this, we need the GDP Defaulter for the base year (2022):
Year 2022:
GDP Defaulter = (Nominal GDP / Real GDP) * 100 = (30,000 / 30,000)*100
= 100
Year 2023:
= ((96.36 - 100)/100) *100 = -3.64% Deflation
Year 2024:
= ((195.38 – 96.36) / 96.36) *100 = 102.73%
