3. Inflation a) What is the difference between real and nominal GDP? b) Suppose the base year is 2005, and the only goods in the economy are apples and bananas. In 2005 both apples and bananas cost $1, and 100 apples and 100 bananas are produced. In 2006, apples cost $20 and bananas cost $5, and 50 apples and 200 bananas are produced. 1. What is nominal GDP in 2005? 2. What is real GDP in 2005? 3. What is the GDP deflator in 2005? In 2006? 4. Suppose the fixed basket of goods is 1 apple and 2 bananas. 5. What is the level of the CPI in 2005? In 2006? 6. What is the CPI inflation rate from 2005 to 2006?