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Assignment 1 Solution Eco 403

This document provides solutions to economics assignment questions using data on the production of apples and mangoes in two years. The nominal GDP for 2021 is calculated as Rs. 82,900. The real GDP for 2021 using 2020 as the base year is Rs. 80,000. The GDP deflator for 2021 is 103.625. Using data on the price and quantity of apples and mangoes, the cost of a basket of goods, consumer price index, and inflation rate are calculated for 2020 and 2021. The inflation rate from 2020 to 2021 is 20.1%.

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Mubeen Raza
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2K views2 pages

Assignment 1 Solution Eco 403

This document provides solutions to economics assignment questions using data on the production of apples and mangoes in two years. The nominal GDP for 2021 is calculated as Rs. 82,900. The real GDP for 2021 using 2020 as the base year is Rs. 80,000. The GDP deflator for 2021 is 103.625. Using data on the price and quantity of apples and mangoes, the cost of a basket of goods, consumer price index, and inflation rate are calculated for 2020 and 2021. The inflation rate from 2020 to 2021 is 20.1%.

Uploaded by

Mubeen Raza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT 1 SOLUTION ECO 403

QUESTION NUMBER 1:
Suppose an economy produces only two goods; apples and mangoes. Calculate the following by
using information given in the table.
Year 2020 Year 2021
Goods Price (Rs.) Quantity Price (Rs.) Quantity
Apples 250 120 260 140
Mangoe 300 130 310 150
s

A. Nominal GDP for year 2021.


Solution:

= [2021 P(A) X 2021 Q(A)] + [2021 P(M) X 2021 P(Q)]


= [ 260 × 140] + [ 310 × 150]
= 36,400 + 46,500
= 82,900 Rs.
B. Real GDP for year 2021 by taking 2020 as base year.
Solution:

= [2020 P(A) × 2021 Q(A)] + [2020 P(M) × 2021 P(Q)]


= [250 × 140] + [300 × 150]
= 35,000 + 45,000
= 80,000 Rs.
C. GDP deflator for year 2021.
Solution:

Nomial GDP
GDP Deflator = × 100
Real GDP

82,900
GDP Deflator = × 100
80,000

GDP Deflator = 1.03625 × 100

GDP Deflator = 103.625 Rs.


QUESTION NUMBER 2:
Calculate the cost of basket, Consumer Price Index (CPI), and inflation rate by using information
given in the table.
Price (R s.) Quantity
Yea Apple Mangoe Apple Mangoe Cost of Basket CPI Inflation rate
r s s s s
202 250 300 120 130 (120×250)+(130×30 69,000 -----------------
= ×
0 0) = 69,000 Rs. 69,000
100
= 100 Rs.
202 260 310 140 150 (140×260)+(150×31 82,900 = {(120.1 -
= ×
1 0) = 82,900 Rs. 69,000 100)/100}×10
100 0
= 120.1 = 20.1%
Rs.

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