**Problem : **

Figure %: Goods and Services Consumed in Country B

Compute the inflation in Country B from period 1 to period 2.

The percent change in the price level (inflation) from the base year to the comparison year is calculated by subtracting 100 from the CPI of the comparison year. In this example, the CPI in period 1 is 100 and the CPI in period 2 is 141. The percent change in the price level from period 1 to period 2 is 141 - 100 = 41%.**Problem : **
Compute the inflation in Country B from period 1 to period 3.

The percent change in the price level (inflation) from the base year to the comparison year is calculated by subtracting 100 from the CPI of the comparison year. In this example, the CPI in period 1 is 100 and the CPI in period 3 is 182. The percent change in the price level from period 1 to period 3 is 182 - 100 = 82%.

**Problem : **
Compute the inflation in Country B from period 2 to period 3, using period as
the base year.

**Problem : **
Calculate the GDP deflator for Country B in year 3 using year 1 as the
base year.

In order to find the GDP deflator, we first must determine both nominal GDP and real GDP in period 3. Nominal GDP in period 3 is (10 X $2) + (9 X $6) = $74 and real GDP in period 3 using period 1 as the base year is (10 X $1) + (9 X $6) = $64. The ratio of nominal GDP to real GDP, the GDP deflator, is ( $74 / $64 ) - 1 = 16%.

**Problem : **
What is the rate of inflation from period 1 to period 3 in the previous
problem?

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