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Please explain the thought process, the answer is provided How are the goods allocated to households? Questions 1 - Question 2: An open economy consumes

Please explain the thought process, the answer is provided

How are the goods allocated to households?

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Questions 1 - Question 2: An open economy consumes four goods only. The following table shows the prices and the quantities exchanged in 2014 and 2015. The year of 2014 is the base year. 2014 2015 Goods Price Quantity exchanged Price Quantity exchanged $5.5 $6 10 $3 $2.5 6 AWNI $4 $4 $3 $2 Additional information: . Households purchased 60% of good 1, and the remaining shares of good I were split equally between firms and government. Firms purchased 20% of good 2 exchanged, and the remaining was purchased by households. In addition, 25% of good 2 exchanged were imported goods and they were all bought by households. The consumption of good 3 was equally split among households, (domestic) government, and foreigners. Government purchased 30% of good 4 and the remaining was bought by firms. In addition, 15% of good 4 was purchased abroad. Unless otherwise stated, the goods are produced within the economy in this question. Question 1 Find the GDP deflator in 2015. Show your work and keep your answer to 2 decimal places if needed. NGDP 2015 = P15 X Q15 = $99.15 RGDP 2015 = P14 X Q15 $102.35 GDP deflator 2015 = $99.15 $102.35 x 100 = 96.87; GDPdeflator2014 = 100

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