READ INSTRUCTIONS CAREFULLY BEFORE ANSWERING QUESTIONS SECTION A: ESSAY AND PROBLEMS Answer all questions in this section. No credits for solutions without clear steps.
1. In 2010, a country had nominal GDP of $6.6 million and GDP deflator of 120. In 2011 the nominal GDP rose to $6.9 million but the GDP deflator rose only to 122. Calculate the growth of real GDP between 2010 and 2011. Applying the rule of 70, how long will it take this country to double this rate of growth? Show all steps.
2. Inflation is defined as rise in the general level of prices. Suggest two types of inflation economists consider problematic in any economy and complete the table below:
Year Price Index Real GDP Nominal GDP 2007 110 275 2008 100 250