Question

Calculate the average inflation rate between 2006 and 2009 and between 2009 and 2012.

In 2006, the quantity of money (in billions of dollars) was 1,366, the velocity was 10.253, the real GDP (in billions of 2012 dollars) was 15,338, and the GDP deflator was 0.913.

In 2009, the quantity of money (in billions of dollars) was 1,692, the velocity was 8.687, the real GDP (in billions of 2012 dollars) was 15,423, and the GDP deflator was 0.953.

In 2012, the quantity of money (in billions of dollars) was 2,461, the velocity was 6.719, the real GDP (in billions of 2012 dollars) was 16,197, and the GDP deflator was 1.021.

Answer 1

To calculate the average inflation rate between 2006 and 2009, we need to determine the percentage change in the GDP deflator over that period.

The GDP deflator is given by the equation:

GDP deflator = (Nominal GDP) / (Real GDP)

Let's calculate the GDP deflator for both 2006 and 2009:

GDP deflator in 2006 = (1366 billion dollars) / (15338 billion 2012 dollars) = 0.0889

GDP deflator in 2009 = (1692 billion dollars) / (15423 billion 2012 dollars) = 0.1097

Now, we can calculate the percentage change in the GDP deflator:

Percentage change = ((GDP deflator in 2009 - GDP deflator in 2006) / GDP deflator in 2006) * 100

= ((0.1097 - 0.0889) / 0.0889) * 100

= (0.0208 / 0.0889) * 100

= 23.39%

Therefore, the average inflation rate between 2006 and 2009 is approximately 23.39%.

To calculate the average inflation rate between 2009 and 2012, we need to determine the percentage change in the GDP deflator over that period.

Let's calculate the GDP deflator for both 2009 and 2012:

GDP deflator in 2009 = 0.1097

GDP deflator in 2012 = 1.021

Now, we can calculate the percentage change in the GDP deflator:

Percentage change = ((GDP deflator in 2012 - GDP deflator in 2009) / GDP deflator in 2009) * 100

= ((1.021 - 0.1097) / 0.1097) * 100

= (0.9113 / 0.1097) * 100

= 830.94%

Therefore, the average inflation rate between 2009 and 2012 is approximately 830.94%.