
(a)
Identify the 2011 and 2012 real
(a)

Explanation of Solution
Table-1 shows the value of nominal GDP and the GDP deflator as follows:
Table-1 | ||||
Nominal GDP (Billions of currency) |
GDP deflator (2005=100) | |||
Country | 2011 | 2012 | 2011 | 2012 |
U | 15,075.7 | 15,684.8 | 113.4 | 115.4 |
C | 1,718.7 | 1,817.6 | 115.2 | 119.7 |
J | 470,623 | 475,867.9 | 91.6 | 91.6 |
I | 1,579.2 | 1,566.3 | 112.7 | 112.7 |
A | 1,444.6 | 1,488.3 | 127.4 | 127.4 |
UK | 1,515.8 | 1,541.5 | 117.1 | 117.1 |
The real GDP can be calculated using the formula as follows:
Substitute the respective values in equation (1) to calculate the rea; GDP of country U.
Therefore, the real GDP of Country U in 2011 is $13,294.2 billion.
Table-2 shows the value of the real GDP in 2011 and 2012, which is calculated using Equation-1 as follows:
Table-2 | ||||||
Nominal GDP (Billions of currency) | GDP deflator |
Real GDP |
Real GDP | |||
Country | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 |
U | 15,075.7 | 15,684.8 | 113.4 | 115.4 | 13,294.2 | 1,3591.68 |
C | 1,718.7 | 1,817.6 | 115.2 | 119.7 | 1,491.92 | 1,518.46 |
J | 470,623 | 475,867.9 | 92.4 | 91.6 | 509,332.25 | 519,506.44 |
I | 1,579.2 | 1,566.3 | 110.9 | 112.7 | 1,423.98 | 1,389.79 |
A | 1,444.6 | 1,488.3 | 128.1 | 127.4 | 1,127.7 | 1,168.21 |
UK | 1,515.8 | 1,541.5 | 115.5 | 117.1 | 1,312.38 | 1,316.39 |
(b)
Identify the inflation rate in 2012.
(b)

Explanation of Solution
The inflation rate in 2014 can be calculated using the formula as follows:
Use Equation-2 to calculate the inflation rate of Country U in 2014 as follows:
Therefore, the inflation rate is 1.76%.
Table-3 shows the value of the inflation rate, which is calculated using Equation-2 as follows:
Table-3 | |||||||
Nominal GDP (Billions of currency) | GDP deflator |
Real GDP |
Real GDP | Inflation rate | |||
Country | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2012 |
U | 15,075.7 | 15,684.8 | 113.4 | 115.4 | 13,294.2 | 1,3591.68 | 1.76% |
C | 1,718.7 | 1,817.6 | 115.2 | 119.7 | 1,491.92 | 1,518.46 | 3.90% |
J | 470,623 | 475,867.9 | 92.4 | 91.6 | 509,332.25 | 519,506.44 | -0.86% |
I | 1,579.2 | 1,566.3 | 110.9 | 112.7 | 1,423.98 | 1,389.79 | 1.62% |
A | 1,444.6 | 1,488.3 | 128.1 | 127.4 | 1,127.7 | 1,168.21 | -0.54% |
UK | 1,515.8 | 1,541.5 | 115.5 | 117.1 | 1,312.38 | 1,316.39 | 1.38% |
(c)
Identify the country that has the highest growth rate of real GDP.
(c)

Explanation of Solution
The growth rate can be calculated using the formula as follows:
Use Equatrion-3 to calculate the growth rate of real GDP as follows:
Therefore, the growth rate of real GDP is 2.237%.
Table-4 shows the growth rate in 2012, which is calculated using the Equation-3 as follows:
Table-4 | |||||||||||
Nominal GDP | Real GDP | Inflation rate | Growth rate | ||||||||
Country | 2011 | 2012 | 2011 | 2012 | 2012 | 2012 | |||||
U | 15,075.7 | 15,684.8 | 13,294.2 | 13,591.68 | 1.76% | 2.237% | |||||
C | 1,718.7 | 1,817.6 | 1,491.92 | 1,518.46 | 3.90% | 1.778% | |||||
J | 470,623 | 475,867.9 | 509,332.25 | 519,506.44 | -0.86% | 1.997% | |||||
I | 1,579.2 | 1,566.3 | 1,423.98 | 1,389.79 | 1.62% | -2.40% | |||||
A | 1,444.6 | 1,488.3 | 1,127.7 | 1,168.21 | -0.54% | 3.592% | |||||
UK | 1,515.8 | 1,541.5 | 1,312.38 | 1,316.39 | 1.38% | 0.305% |
According to Table-4, Country A has the highest growth rate of real GDP, which is 3.592% and Country I has the lowest growth rate of real GDP, which is -2.40%.
(d)
Identify the countries that have the highest and lowest inflation rate.
(d)

Explanation of Solution
According to Table-3, Country C has the highest inflation rate, which is 3.90% and Country J has the lowest inflation rate, which is -0.86%.
(e)
Identify the country that has the most inflation
(e)

Explanation of Solution
According to the data from Table-4, Country C has the highest inflation rate, which is 3.90%. Therefore, Country C has the most inflation during 2012.
Inflation: Inflation is a sustained rise in the price level of a selected basket of goods and service for a particular period.
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Chapter 8 Solutions
Macroeconomics: Private and Public Choice
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