Suppose there are two economies--X and Y. The following data is available for the year 2007 (Base year) and 2008 (current year):

Economy X..............................................................Economy Y

Nominal GDP........GDP deflator Nominal GDP...........GDP deflator

2007...............................$48 billion 100 $40 billion 100

2008...............................$52 billion 105 $47 billion 115

Question:

(a) Use calculations to explain which economy experienced the fastest economic growth between 2007 and 2008.............(4 marks)

(b) Calculate the inflation rate in each economy............(3 marks)