Question
Year Quantity Goods Quantity Services Price Goods Price Services 2010 2000 6200 2 1.5 2011 2200 6400 2.11 1.65 2012 2500 6750 2.15 1.65 2013
Year | Quantity Goods | Quantity Services | Price Goods | Price Services |
2010 | 2000 | 6200 | 2 | 1.5 |
2011 | 2200 | 6400 | 2.11 | 1.65 |
2012 | 2500 | 6750 | 2.15 | 1.65 |
2013 | 2505 | 7100 | 2.3 | 1.9 |
2014 | 2700 | 7300 | 2.35 | 2 |
2015 | 3050 | 8000 | 2.5 | 2 |
2016 | 3100 | 8450 | 2.65 | 2.1 |
2017 | 3500 | 8650 | 2.7 | 2.15 |
Assume that consumers’ typical consumption basket of goods and services is exactly represented by the (relative) quantities of goods and services produced in 2015.
a. Calculate the implied CPI in each year, based on 2015 consumption quantities.
b. Calculate the CPI inflation rate for each year and the annual average inflation rate. How do these compare to the annual and annual average inflation rate of the GDP deflator? What is the correlation between the two inflation rates? Why do the two inflation rates in this example differ, if they do? What are the sources of differences in the two inflation rates in reality
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a To calculate the implied CPI Consumer Price Index in each year based on 2015 consumption quantities we can use the following formula Implied CPI Quantity Goods in the Current Year Quantity Goods in ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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