Consider the following production data for an economy and answer the below questions:
Year P1 Q1 P2 Q2 P3 Q3
1* 10 100 12 60 4 70
2 11 120 12 65 5 75
3 10.5 125 11 70 4.5 80
a. Calculate nominal GDP for each year.
b. Given that year 1 is the base year, calculate real GDP for each year.
c. Calculate the rate of real economic growth in years 2 and 3.
d. For each year, calculate the GDP deflator.
e. Based on d. calculate the rate of inflation for years 2 and 3.
f. Assume that the CPI basket contains 5Q1, 3Q2 & 1Q3, calculate the cost of the basket in each year.
g. Based on f. construct a CPI using 1 as the index number.
h. Based on g. calculate the rate of inflation for years 2 and 3.