The data below are from the economies of Bonvampton and Karbandia.

(a) Calculate each of the following for Year 2. Show your work.) Real GDP per capita for
Bonvampton(1) Real GDP per capita for Karbandia

(b) of Bonvampton and Karbandia have the same velocity of money in Year 2, which economy
must have the higher money supply in Year 2? Explain.

(c) Calculate each of the following in Yoar 2. Show your work. (0) The inflation rate in
Bonvampton(i) The inflation rate in Karbandia

(d) Based on your answer to part (c), if the nominal interest rate is the same for both economies
in Year 2, which economy experiences the higher real interest rate in Year 2? Explain.

(e) Assume that in Year 11 Karbandia is operating inside its production possibilities curve and that
Karbandia's production possibilities curve remains unchanged from Year 1 to Year 2. As a result of
the change in real GDP from Yoar 1 to Yoar 2, doos Karbandia's economy move closer to or
farther away from its production possibilities curve? Explain using numbers for real GDP and state
what will happen to cyclical unemployment in the short run.

A) The question is about GDP Comparison between Bonvampton and Karbandia. Hence, the real GDP/Capital for Bonvampton is 330/10=$33. While that of Karbandia in year 2 is 720/20 = $36.

What is Read GDP Per Capita?

GDP Per Capital simply means how much each person in the country is estimated to have contributed to the economies output or GDP.

it is calculated by dividing the GDP by the population in that given period. It also assumes that price is constant.

B) By simple rule of thumb, it is easy to state that the country which has a higher supply of money is Karbandia. This is because it has the highest population and the highest real and nominal GDP.

C) The Inflation Rate is also known as the difference between the GDP Deflators of the years under scrutiny.

To get the inflation rate, simply subtract the current GDP Deflator from the old and divide your answer by the Old GDP Deflator.

For Bonvamption, that would be:

(110-100)/100 = 0.1%

For Karbaindia, that would be:

(120-100) / 100 = 0.2%. This confirms that Karbaindia has a higher money supply given that it has a higher inflation rate.

D) Real Interest rate is arrived at by removing inflation rate from the nominal interest rate.

E) Karbandia's economy is moving farther away from its Production Possibility Curve because its inflation rate is growing while the Nominal GDP is falling. Because the output is falling, there will be an increase in cyclical unemployment in the short run. Notice how production dropped from 800 to 720.

See the link below for more about GDP Comparison:
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