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GDP and Inflation

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Let us assume that economic forecasts are predicting falling GDP (Gross Domestic Product) coupled with high inflation over the next couple of years. Based on this information, if you were a portfolio manager what would your recommendations be for investing in the construction industry? Why? What about in the health care industry? Why?

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As for investing in the construction industry, I (in the above scenario) would advise against it. The GDP is a measure of all things produced by all persons and all comapnies within a country. Therefore, if the GDP is expected to fall, all output will fall. Now, this does not necessarily stipulate that construction will fall, but on a whole, the average industry will decline.

However, if inflation is ...

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The solution describes the effects of falling GDP and high inflation.

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Nominal GDP, real GDP, rate of inflation

Suppose hamburgers cost 1.50 last year and 1.65 this year, and the overall price index (the GDP deflator )rose for 125 last year to 150 this year.
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b. How much will 1,000 hamburgers contribute to this year's real GDP?
c. What was the rate of inflation during the past Year?

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