Question

Consider an Economy that produces only Apples and Bananas. The following Table contains per unit price (in INR) and quantity (in kg) of these goods. Assuming 2010 as the Base Year and using GDP deflator to calculate the annual inflation rate, which of the following options is CORRECT?

Year	Price of Apple	Quantity of Apple	Price of Banana	Quantity of Banana
2010	1	100	2	50
2011	1	200	2	100
2012	2	200	4	100

• A. GDP deflator for the year 2011 is 100 and the inflation rate for the year 2011 is 0 %
• B. GDP deflator for the year 2012 is 50 and the inflation rate for the year 2012 is 100 %
• C. GDP deflator for the year 2011 is 50 and the inflation rate for the year 2011 is 0 %
• D. GDP deflator for the year 2012 is 100 and the inflation rate for the year 2012 is 100 %

Answer 1

Answer: (A)

GDP deflator for the year 2011 is 100 and the inflation rate for the year 2011 is 0 %

Answer 2

The correct option is (A): GDP deflator for the year 2011 is 100 and the inflation rate for the year 2011 is 0 %