Topic 2.6 Real vs Nominal GDP Part 1: Answer the vocabulary questions below. 1. What is the difference between real GDP and nominal GDP? 2. What is the difference between the CPI and the GDP deflator? Part 2: The table below shows the quantities of goods and services produced and their prices for different years in the economy for Country A Products 2010 2010 Prices 2015 2015 Prices 2020 2020 Prices Quantities (Base Year) Quantities Quantities Shovels 100 $20 150 $25 200 $40 Tables 150 $200 200 $300 200 $400 Bicycles 50 $100 70 $200 100 $200 1. Calculate the Nominal and Real GDP for each year using the year 2010 as the base year. Show your work. Nominal Value Real Value 2010 2015 2020 2. Using the nominal and real values from number 1 above, calculate the GDP deflator for each year. Show your work. 2010 2015 2020Part 3: The chart below shows the GDP deflators for Country I with the year 195i] as the base year. For each of the goods below, calculate the real value of the item. Show your work. Real Value In 211m, a 5|] inch television had a price of $50!] In 201D, a ski boat had a price of $39,!l0t] |n193 a pair of leg warmers was $11 Topic 2.4 & 2.5 Price Indices & Inflation Part 1: Match the key term with the correct definition. a. Consumer Price Index c. Deflation e. Real value b. Inflation d. Disinflation f. Nominal value When the price of a product has been adjusted for price changes (base year price) When the general level of prices rise When the price of a product has not been adjusted for price changes (current year price) When prices are rising but at a slower rate than they had been in the past A number to track changes in the prices of a market basket of goods and services When the general level of prices falls Part 2: The table below shows the market basket for a Consumer Price Index (CPI) and the prices of the goods and services within the basket for different years. Good Quantity 2005 Price 2010 Price 2015 Price 2020 Price (base year) Sandwiches 100 $2 $3 $4 $5 Shoes 5 $40 $50 $60 $60 Phones $400 $500 $600 $600 Calculate the value of the basket and the CPI for different years assuming the year 2005 is the base year. Show your work. Basket Value CPI 2005 2010 2015 2020Part 3: Calculate the amount of inflation between the two years based on changes in the CPI. Show your work CPI Change Amount of inflation From 100 to 115 From 150 to 200 From 200 to 240 From 300 to 375 Part 4: Explain how each of these makes the CPI a less accurate measure of how inflation impacts average citizens. Substitution Bias: Quality Change Bias: New Goods Bias: Part 5: Read each scenario and place an "X" in the appropriate column depending on if the person described is helped, hurt, or unaffected by higher than expected inflation. Helped Hurt Unaffected A person who saves a lot of money A person whose wages rise with inflation A person on a fixed income A person in debt A bank that loans out a lot of money A renter with a fixed payment 3-year lease for their apartment 1. Why are borrowers helped by higher than expected inflation? 2. Why are lenders hurt by higher than expected inflation