Question

D Question 1 2.5 pts For the all questions on the assignment, you'll work with the same data. Consider an economy in which production and prices for three years (2014, 2015, and 2016) are summarized in the following table: Year Food Price of Shelter Price of Medication Price of Produced Food Produced Shelter Produced Medication 2014 20,000 $2.10 8000 $40 600 $50 2015 21.500 $2.50 8200 $40 650 $100 2016 24,000 $2.70 8400 $40 1000 $120 Economists treat 2014 as the base year in their calculations. They have determined that the average citizen consumes 30 units of food, 12 units of shelter, and 6 units of medication per year. You will calculate several values over the next several questions. For each. Remember that following instructions in formatting and rounding is essential to get paints. Please double check the assignment Instructions and consult the math review (and/or me) for any further questions, First, calculate nominal GDP for 2016. 520,800 Question 2 2.5 pts Using the same data as the previous question and carefully following all numeric directions, calculate real GDP for 2015 405,650

question 1: nominal GDP for 2016
question 2: real gdp for 2015

question 3: GDP deflator for 2014
question 4: calculate cost/price of the market basket for 2015
question 5: calculate CPI for 2016

question 6: use CPI to calculate the inflation rate from 2014 to 2015

question 7: which person makes more in inflation-adjusted terms or (real) terms? would it change if nick made 82k a year instead?

question 8: best too look at pic.

Note: please show work and throughly explain how you found your answer. I plan on using this as a study guide. Thank you very much

Answer 1

Nominal GDP Real GDP Expenditure Expenditure in Expenditure in Expenditure Expenditure in Expenditure in Market basket in 2014 (base year) 2015 2016 in 2014 2015 2016 in 2014 2015 2016 2015 Market basket in 2016 Price ($) Quantity Price ($) Quantity Price ($) Quantity 2.10 20000 2.50 21500 2.70 24000 42000 53750 64800 42000 45150 504001 50000 40 8000 4 0 8200 4 0 8400 320000 328000 336000 3200000 328000 3360001 320000 50 600 100 650 120 1000 30000 65000 120000 30000 32500 50000 60000 392000 446750 5 20800 392000 405650 436400 430000 Food Shelter Medicine 54000 320000 72000 446000 Nominal GDP: the value of final goods and services at current prices Question 1 Nominal GDP in 2016=$520800. Question 2 Real GDP: The value of final goods and services at base vear prices In base year, nominal and real GDP are the same. Real GDP in 2015=$405,650. Question 3 GDP deflator = (Nominal GDP/Real GDP)100 GDP deflator in base year (2014) is 100 Question 4 Market basket in 2015-Base year quantity times current year price. $430,000. Question 5 CPI for 2016 CPI=( Cost of the base year market basket in the current period/Cost of the base year market basket in the base period)x100 CPI in base year is always 100 446,000/392,000=113.78. Question 6 Inflation rate from 2014 to 2015 ((Current period CPI-Prior period CPI/Prior period CPI)) 100 430,000/392,000=1.0969 CPI in 2015 %= 1.0969 x 100=109.69 Inflation rate between 2014 and 2015 (109.69-100/100=9.69/100=0.0969x100-9.69%