Table 5-6
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009.
Prices and Quantities

-Refer to Table 5-6. This country's inflation rate from 2010 to 2011 was

Question

Table 5-6
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009.
Prices and Quantities
 
-Refer to Table 5-6. This country's inflation rate from 2010 to 2011 was

Quizplus · Accepted Answer

To find the inflation rate, we need to calculate the GDP deflator for 2010 and 2011. The formula for GDP deflator is (nominal GDP/real GDP) x 100. We do not have the values of nominal and real GDP, but we can use the formula (nominal price/real price) x 100 to calculate the relative price in each year.

For waffles, the relative price in 2010 is (2.50/2.00) x 100 = 125, and in 2011 it is (3.00/2.50) x 100 = 120. For pancakes, the relative price in 2010 is (2.00/1.50) x 100 = 133.3, and in 2011 it is (2.50/1.75) x 100 = 142.9.

To calculate the GDP deflator, we need to find the weights for each product. The table gives us the quantity produced in each year, so we can use that as the weight. The GDP deflator in 2010 is (125 x 100 + 133.3 x 200) / (100 + 200) = 130.77. The GDP deflator in 2011 is (120 x 100 + 142.9 x 200) / (100 + 200) = 138.09.

The inflation rate is (GDP deflator in 2011 - GDP deflator in 2010) / GDP deflator in 2010 x 100. Plugging in the numbers gives us (138.09 - 130.77) / 130.77 x 100 = 5.6%. However, this is the inflation rate for the overall economy, taking into account both waffles and pancakes. Since the prices of waffles and pancakes changed by different amounts, their inflation rates would be different.

To find the inflation rate for waffles, we need to use the formula (nominal price/real price) x 100, where nominal price is the price in 2011 and real price is the price in 2010. For waffles, the inflation rate is (3.00/2.50) x 100 - 1 = 20%. Similarly, for pancakes, the inflation rate is (2.50/1.75) x 100 - 1 = 42.9%.

The question asks for the inflation rate from 2010 to 2011, so we can either take the average of the inflation rates for waffles and pancakes or use a weighted average based on their production quantities. Using the latter method, the inflation rate is (20% x 100 + 42.9% x 200) / (100 + 200) = 34.1%. Therefore, the answer is C.

Table 5-6 The Table Below Contains Data for the Country of Batterland