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Question
Statistics
Posted 7 months ago

The table below shows the nominal GDP and the real GDP for the country of Hamsterville over three years
\begin{tabular}{lll} 
Period & Nominal GDP & Real GDP \\
\hline Year 1 & $120\$ 120 billion & $130\$ 130 billion \\
Year 2 & $150\$ 150 billion & $150\$ 150 billion \\
Year 3 & $160\$ 160 billion & $140\$ 140 billion
\end{tabular}

Which of the following can be concluded from the data above?
Choose 1 answer:
(A) Year 1 is the base year for the GDP deflator price index
(B) The economy's output of goods and services increased every year between years 1 and 3
(c) The composition of the country's output changed between years 2 and 3 , shifting from capital goods to consumer goods
(D) The economy experienced inflation between years 2 and 3
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Answer from Sia
Posted 7 months ago
Solution by Steps
step 1
To analyze the data, we compare nominal GDP and real GDP for each year
step 2
Nominal GDP is the market value of goods and services produced in a year using current prices, while real GDP is adjusted for inflation and reflects the value using constant prices
step 3
By comparing the nominal and real GDP, we can infer about inflation or deflation. If nominal GDP is higher than real GDP, it indicates inflation. If nominal GDP is lower than real GDP, it indicates deflation
step 4
For Year 1, Nominal GDP is 120billionandRealGDPis120 billion and Real GDP is 130 billion, suggesting deflation if Year 1 is the base year
step 5
For Year 2, Nominal GDP equals Real GDP at $150 billion, indicating no inflation or deflation if Year 2 is the base year
step 6
For Year 3, Nominal GDP is 160billionandRealGDPis160 billion and Real GDP is 140 billion, indicating inflation if Year 3 is the base year
step 7
Since we see inflation from Year 2 to Year 3 (nominal GDP increased more than real GDP), we can conclude that the economy experienced inflation between these years
Answer
D
Key Concept
Inflation and Real vs Nominal GDP
Explanation
Inflation is indicated when nominal GDP grows faster than real GDP, as seen from Year 2 to Year 3 in the data provided.

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