Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose people consume 3 different goods. The following table shows the prices and quantities of each good consumed in 2006, 2007, and 2008. Year Price
- Suppose people consume 3 different goods. The following table shows the prices and quantities of each good consumed in 2006, 2007, and 2008.
Year | Price of Pizza | Quantity of Pizza | Price of Burger | Quantity of Burger | Price of coffee | Quantity of Coffee |
2006 | $ 4 | 200 | $ 6 | 125 | $ 8 | 100 |
2007 | $ 6 | 350 | $ 8 | 200 | $ 9 | 175 |
2008 | $ 7 | 600 | $ 9 | 350 | $ 12 | 250 |
a) Calculate nominal GDP in each of the three years. (1.5 Marks)
b) Calculate Real GDP in each of the three years, using 2006 as the base year. (1.5 Marks)
c) Calculate the rate of inflation for 2007 and 2008 using the GDP deflator as your price index. Assume that 2006 is still the base year. (2 Marks)
d) Using the quantities from 2006 for your market basket, and 2006 as your base year, calculate the CPI for 2006, 2007 and 2008. (2 Marks)
e) Using the CPI calculate the rate of inflation. (1 Mark)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started