Question
The economy of Britannica produces three goods: computers, DVDs, and pizza. The accompanying table shows the prices and output of the three goods for the
The economy of Britannica produces three goods: computers, DVDs, and pizza. The accompanying table shows the prices and output of the three goods for the years 2010, 2011, and 2012.
Year Computers DVDs Pizzas
PriceQuantity PriceQuantity PriceQuantity
2010 $900 10 $10 100 15 2
2011 1,000 10.5 12 105 16 2
2012 1,050 12 14 110 17 3
a.Calculate nominal GDP in Britannica for each of the three years. What is the per- cent change in nominal GDP from 2010 to 2011 and from 2011 to 2012?
b.Calculate real GDP in Britannica using 2010 prices for each of the three years. What is the percent change in real GDP from 2010 to 2011 and from 2011 to 2012?
c.Calculate the aggregate price level (with a base year of 2010) using the Laspeyres (CPI-style) price index, measured to the nearest one-hundredth,
d.Calculate the aggregate price level (with a base year of 2010) using the Paasche (GDP-deflator-style) price index, measured to the nearest one-hundredth.Compare to the Laspeyres - which index implies there is a greater rate of inflation?Why is it greater?
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