(b) Assume that year 2020 is the base year. There are only two goods produced domestically and the coverage of the CPI and GDP deflator is the same. Price in 2020 $50 $100 Basket of Goods Good X Good Y Quantity in Price in 2021 2020 30 20 $40 $110 Quantity in 2021 20 30 (i) Using GDP deflator, calculate the rate of inflation between year 2020 and 2021, (ii) List out TWO (2) impacts of inflation and elaborate.

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Chapter11: Measuring The Cost Of Living
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(b)
Assume that year 2020 is the base year. There are only two goods produced
domestically and the coverage of the CPI and GDP deflator is the same.
Price in 2020
$50
$100
Basket of
Goods
Good X
Good Y
(i)
(ii)
Quantity in Price in 2021 Quantity in
2020
2021
30
20
20
30
$40
$110
Using GDP deflator, calculate the rate of inflation between year 2020 and 2021,
List out TWO (2) impacts of inflation and elaborate.
Transcribed Image Text:(b) Assume that year 2020 is the base year. There are only two goods produced domestically and the coverage of the CPI and GDP deflator is the same. Price in 2020 $50 $100 Basket of Goods Good X Good Y (i) (ii) Quantity in Price in 2021 Quantity in 2020 2021 30 20 20 30 $40 $110 Using GDP deflator, calculate the rate of inflation between year 2020 and 2021, List out TWO (2) impacts of inflation and elaborate.
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