I Understanding Price Indexes Suppose the economy of Strandasville produces only four goods: CDs, pizza, desk chairs, and sweaters. The following tables show the dollar value of output for three different years.

Year Number of Desk Chairs Price per Chair Number of Sweaters Price per Sweater 1

2 3

3,000 3,000 3,500

$20

$25

$25 5,000 5,000 4,900

$20

$18

$15 1. Calculate the total dollar value of output for year 1, year 2, and year 3.

2. The dollar value of output in year 2 is higher than the dollar value of output in year 1

a. entirely because of price changes.

b. entirely because of output changes.

c. because of both price and output changes.

3. The dollar value of output in year 3 is higher than the dollar value of output in year 2

a. entirely because of price changes.

b. entirely because of output changes.

c. because of both price and output changes.