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Part 1 Between 2015 and 2016, the country of West Fredonia experienced a growth rate of -2.6%....

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Economics

Part 1

Between 2015 and 2016, the country of West Fredonia experienceda growth rate of -2.6%. If nominal GDP had increased by 1.3% andthe population growth was recorded as 0.4%, then calculate theannual inflation rate in West Fredonia. Give your answer to onedecimal._____________    %

Part 2

YearNominal GDP
(billions of current $)		Inflation ratePopulation
(millions)
201437542%117
201538983%120
201639191%124


Using the information in the table above, calculate economic growthfor 2015. Give your answer to two decimal places.
__________    %

Answer & Explanation Solved by verified expert
3.8 Ratings (373 Votes)

Solution:-

Part:-1

Calculate Annual inflation rate:-

Growth rate = Growth rate of nominal GDP - annual inflation rate - population growth rate

-2.6% = 1.3% - annual inflation rate – 0.4%

-2.6% = 0.9% - annual inflation rate

Annual inflation rate = 2.6% + 0.9% = 3.5%

Part:-2

Nominal GDP Growth rate = (3898 - 3754) / 3754

                        = 144 / 3754

                        = 3.84%

Population Increase Rate = (120 - 117) / 117

                         = 3 / 117

                         = 2.56

Economic Growth Rate = 3.84 - 2.56 - 3

                     = -1.72
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