In 2010 a country had nominal GDP of 6 trillion euro and real GDP of 5 trillion euro. In 2011 it had nominal GDP of 6.5 trillion euro and real GDP of 5.2 trillion euro. What was its inflation rate in 2011? Show your work
The GDP deflator for 2010 was 100 x 6/5 = 120.
The GDP deflator for 2011 was 100 x 6.5/5.2 = 125.
The inflation rate was (125-120)/120 = 5/120 = 4.167.
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What will be an ideal response?
Everything else held constant, if total consumption increases from $600 to $800 because of an increase of disposable income of $400, then the mpc is equal to
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