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Suppose the GDP Deflator Is 100 in 2009 and 101

question 152

Essay

Suppose the GDP deflator is 100 in 2009 and 101 in 2010.
(A)Suppose the economy is at potential GDP in 2009 and 2010.What is the rate of inflation in 2010?
(B)Suppose instead that real GDP is above potential GDP in 2010.How is the adjustment back to potential made in this situation?


Definitions:

Socio-economic Status

A combined measure that typically includes a person's income, education level, and occupation, used to classify individuals or groups in a hierarchy.

Meritocracy

A system where individuals' success and social standing are based on their talents, effort, and achievements, rather than on wealth or social class.

Social Status

An individual’s position within the class structure.

Class Structure

A society’s economic hierarchy that categorizes groups of people based on their socioeconomic status.

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