Homework Answers
SOLUTION:
1)
|
Good |
Quantity |
Price |
Quantity |
Price |
|
Broccoli |
300 |
0.5 |
250 |
0.5 |
|
Cauliflower |
400 |
0.4 |
400 |
0.8 |
Year 1 nominal GDP = 300* 0.5 + 400 * 0.4 = 310
Year 1 real GDP = 300* 0.5 + 400 * 0.4 = 310
Year 2 nominal GDP = 250 * 0.5 + 400 * 0.8 = 445
Year 2 real GDP = 250*0.5 + 400 * 0.4 = 285
Year 1 GDP deflator equals
Year 2 GDP deflator: 445/285 * 100 = 156.14%
The percentage change in the deflator is 56.14%
2) CPI Year 1 = 100
CPI Year 2 = (300 * 0.5 + 400 * 0.8) / (300 * 0.5 + 400 * 0.4) * 100 = 470/310 * 100 = 151.61
The percentage change in CPI is 51.61%
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2) The residents of Vegopia spend all of their income on
cauliflower, broccoli, and carrots. In 2016, they spend a total of
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and $45 for 450 carrots. In 2017, they spend a total of $225 for 90
heads of cauliflower, $112 for 80 bunches of broccoli, and $120 for
400 carrots.
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