Year NGDP 1984 3777,2 1985 4038,71 1986 4268,6 1987 4539,9 1988 4900,4 1989 5250,8 1990

5546,1 1991 5724,8 1992 6020,2 1993 6343,3

RGDP 4150,769231 4296,5 4405,159959 4539,9 4716,458133 4839,447005 4895,05737 4868,027211 4979,5 5136,275304

GDP NGDP RGDP Deflator Inflation Unemployment growth growth 0,91 7,5 0,94 0,032 7,2 0,065 0,034 0,969 0,030 7,0 0,054 0,025 1,00 0,031 6,2 0,060 0,030 1,039 0,038 5,5 0,074 0,037 1,085 0,042 5,3 0,067 0,025 1,133 0,042 5,6 0,053 0,011 1,176 0,037 6,8 0,031 -0,006 1,209 0,027 7,5 0,049 0,022 1,235 0,021 6,9 0,051 0,031

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Read more: http://www.investopedia.com/terms/p/phillipscurve.asp#ixzz1rNKubsWM

1.The real GDP of goods was found by dividing Nominal GDP by GDP deflator and the result was multiplied by 100. Since the formula of finding RGDP is : RGDP= Nominal GDP

x 100

GDP Deflator
The GDP Deflator was found by dividing the Nominal GDP to Real GDP. The formula for GDP deflator is :

GDP Deflator = Nominal GDP Real GDP

And the formula for finding the Nominal GDP is: NGDP =RGDP x GDP Deflator As for inflation, it is defined as a growth in the overall level of price, while deflation is defined as a decrease in the overall level of price. The formulae for inflation rate, NGDP growth are:

Nominal growth = real growth rate x inflation

Inflation rate = Pt Pt-1 Pt-1

2) Nominal GDP can be increased and Real GDP can be decreased at the same period because the nominal GDP calculates the consumption, investment and spending of government in dollar terms. Real GDP can be decreased at the same period because it begins with the Nominal GDP number and after divides this by the deflator that regulates the inflation. As inflation increases quickly, it is normal for Nominal GDP to increase while the deflated Real GDP decreases. Nominal GDP always increases because of factors such as, effects of inflation or due to increased output . Since, each year the price level and the money supply changes and this affects to the Nominal GDP because after inflation the figures of nominal GDP also changes. Thereby, nominal GDP mostly increases due because the level of the prices increases. The figure of Nominal GDP may decrease only when the production of the goods decreases rather significantly especially during the financial crisis. However Real GDP Thus from the graph below it can be noticed that, how Nominal GDP
7000 6000 5000 4000 NGDP 3000 2000 1000 0 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 RGDP

3)The given chart shows the relation between output and unemployment. The relation between them known as Okuns law. Any change in output can affect the unemployment rate. According to Blanchard If output and
employment changes at the same time together. For instance if the percentage of output increases by a 1%, employment rate also rises by 1%.Moreover, unemployment and employment rate changes oppositely. Since, 1 % increase in employment rate results in 1% decrease in the unemployment rate. .In other words any change in the rate of unemployment would be equal to the negative rate of growth of output. For instance, If output growth equals to 4% for a particular year, then the rate of unemployment should decrease by 4% in that year.

Unemployment
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0 2000 4000 6000 8000 Linear (Unemployment) Unemployment

4) relation between in.ation and unemployment The next given chart illustrates the relation between inflation and unemployment. The relationship between inflation and unemployment rate known as Philips curve. Philips curve concept were developed by A.W. Philips. The concept states that the unemployment and inflation rate have inverse and stable influences among themselves. If the employment rate is low it results in high inflation whereas high inflation brings to the low unemployment rate. Moreover, the theory claims that economic growth leads to inflation which in turn leads decrease the unemployment rate by giving more jobs . However, the concept was disproven in the 1970s , when the inflation and unemployment rose rather significantly together because of stagflation. The Philips curve may be found by the formula

0.050 0.040 0.030 0.020 0.010 0.000 5.0

Inflation and unemployment relation

0.042 0.042 0.038 0.031 0.037 0.032 0.030 0.021 0.027 Inflation and unemploym ent relation

5.5

6.0

6.5

7.0

7.5

8.0

Task 2

1.