Exhibit 25-3 -Suppose the GDP Deflator Is 100 in 2015 and 101

question 87

Essay

Exhibit 25-3 $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Inflation } \\\text { (percent) }\end{array} & \begin{array} { c } \text { Real GDP } \\\text { (billions of } \\\text { dollars) }\end{array} \\\hline 4.5 & 6,700 \\\hline 3.5 & 6,800 \\\hline 2.5 & 6,900 \\\hline 1.5 & 7,000 \\\hline 5 & 7,100 \\\hline\end{array}$$
-Suppose the GDP deflator is 100 in 2015 and 101 in 2016.
(A) Suppose the econamy is at potential GDP in 2015 ant 2016 . What is the rate of inflation in 2016 ?
(B) Suppose instead that real GDP is abave patential GDP in 2016. Haw is the adjustrent back ta potential made in this situation?

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